Question

The fixed costs for manufacturing hand-painted wooden decorative plaques are $7,000. The 2inch oval plaques are sold at craft fairs for $3.00. Variable costs to produce 100 plaques are $100. What is the break-even point in units?

a. cannot be determined from the information given
b. 7000 plaques
c. 1,500 plaques
d. 2000 plaques
e. 3,500 plaques

Answer 1

The break-even point for the hand-painted wooden decorative plaques is 3,500 plaques, calculated using the difference between the selling price and the variable cost per unit to cover the fixed costs.

Step-by-step explanation:

The break-even point in units for hand-painted wooden decorative plaques, given the fixed costs of $7,000 and the selling price of $3.00 per plaque with variable costs of $1.00 per plaque (since $100 for 100 plaques), can be calculated using the formula:

Break-Even Point (units) = Fixed Costs / (Selling Price - Variable Cost per Unit)

Break-Even Point (units) = $7,000 / ($3.00 - $1.00)

Break-Even Point (units) = $7,000 / $2.00

Break-Even Point (units) = 3,500 plaques

Therefore, the break-even point is 3,500 plaques.