Question

Northwest Molded molds plastic handles which cost $1.00 per handle to mold. The fixed cost to run the molding machine is per week. If the company sells the handles for $4.00 each, how many handles must be molded weekly to reach the break-even point?

Answer 1

To reach the break-even point, Northwest Molded needs to mold at least 84 handles per week.

Step-by-step explanation:

To find the break-even point, we need to calculate the total cost and total revenue.

Fixed cost is the cost to run the molding machine per week.

Variable cost is the cost per handle.

Let's assume the break-even point is x handles.

Total cost = Fixed cost + Variable cost * x

Total revenue = Selling price * x

At the break-even point, total cost = total revenue

Therefore, Fixed cost + Variable cost * x = Selling price * x

Solving for x, we get x = Fixed cost / (Selling price - Variable cost)

Plugging in the given values, x = $250 / ($4.00 - $1.00) = $250 / $3.00 = 83.33

Since we can't mold a fractional number of handles, we round up to the nearest whole number. Therefore, the company must mold at least 84 handles weekly to reach the break-even point.