Question

The Commerce Students Society orders cloth patches embossed with the business school's crest. The patches have Velcro to attach them over the pocket of a jacket. The patches come in a box containing 75 units. The manufacturer has stipulated that patches must be ordered in boxes. The cost of each patch to the society is $1.61. The society intends to sell each patch for $5.33. Student volunteers selling the patches are to be paid a commission of $0.50 for each patch sold. The school admits 325 students each year. The society hopes to tell each student a patch and consequently has blaced an order for the minimum number of boxes required to sell at least 325 patches. How many patches must be sold for the society to break even? Select one a.250 5150 C 125 d. 114

Answer 1

Answer

(C) 125

Calculations:

Selling price	$     5.33
Less: Variable costs	$     0.50
Contribution per unit	$     4.83
Puchase Cost (375*1.61)(Note)	$ 603.75
Break even point	125

Purchase Cost is taken for 375 units because 325 / 75 = 4.33 patches. So, 5 patches will be ordered.

In case of any doubt, please comment.