Question

As a graphic artist, Randy has just finished a new calendar. The calendar cost him $1.00 for the glossy paper, $3.00 for the six color production, and $.50 for the plastic wire that holds it together at the top. The labor in developing the design was 4 hours of work at $50/hour, and labor is being added to the rest of the fixed costs of $500.00. At a price of $15.00 per calendar, how many calendars will Nate need to produce and sell in order to break even (cover all his costs, but not make a profit)

Answer 1

Break-even units = 66.67 units

Step-by-step explanation:

Break-even point is the level of activity that achieves no profit or loss. At this level profit is zero because the the total revenue is equal to total cost.

The break-even point is calculated as

Units to achieve target profit = (Total general fixed cost for the period + target profit)/ contribution per unit

Contribution per unit = Selling Price - Variable cost

Contribution per unit = 15- (1+3+0.50) = 10.5

Fixed cost = 500 +( 50× 4) = 700

So the units requited to achieve break-even point:

Break-even point = 700/10.5

= 66.67 units