Question

Chapter 75 - Question 07 Homework – Unanswered Dream No Little Dreams is whitewater rafting adventure company in Colorado started by a Texas Tech graduate. Due to quality and availability problems, management has decided to produce their own rubber rafts. The initial investment in plant equipment is estimated to be $2,000.00. Labor and material cost is approximately $5.00 per raft. If the rafts are sold at a price of $10.00 each, what volume of demand would be necessary to break even? 400 units 600 units 1o C 800 units 1,000 units 1,200 units

Answer 1

Total Fixed Cost Breakeven Sales Volume = Selling Price - Variable Cost

Investment of plant eqipment = fixed cost = $ 2000

Selling proce = $10 (given)

Labour cost = variable cost = $5

Using the formula:

Total Fixed Cost Breakeven Sales Volume = Selling Price - Variable Cost

2000 2000 Breakeven Sales Volume = = 400 10

Therefore, the breakeven sales volume is A) 400 units