Janice Smith is an expert at calligraphy. However, it is found that a specialized robot can...
Janice Smith is an expert at calligraphy. However, it is found that a specialized robot can imitate Janice's work perfectly. Variable costs are 75% of selling price and fixed costs are $190,000 for the robot system.
b. How many pieces must be produced to break even if she sells them for $250 and variable costs drop to 70% of selling price?
Homework Answers
Pieces that must be produced to break even:
Given
Selling price = $250
Variable cost per unit = 70% of selling price = $250×70% = $175
Fixed costs = $190000
Now,
Contribution margin per unit
= Selling price - variable cost per unit
= $250 - $175
= $75
It was known that,
BREAK EVEN POINT (no. of pieces)
= Fixed cost ÷ contribution margin per unit
= $190000 ÷ $75
= 2533 pieces
Therefore,
The number of pieces that must be produced to break even is 2533 pieces.
_____×_____
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