Question

Smithson Cutting is opening a new line of scissors for supermarket distribution. It estimates its fixed cost to be $ 450.00 and its variable cost to be $ 0.50 per unit. Selling price is expected to average $ 0.75 per unit. ​a) For Smithson​ Cutting, the​ break-even point in units​=(enter your response as a whole​ number).

Answer 1

Answer:

The break even point is 1,800 units.

Explanation:

Smithson Cutting is opening a new line of scissors for supermarket distribution.

The fixed cost is estimated to be $450.00 and its variable cost to be $0.50 per unit.

Selling price is expected to average $0.75 per unit. ​

Contribution margin per unit

= Sales - Variable cost

= $0.75 - $0.50

= $0.25

Break even point

= $\frac{Fixed\ costs}{Contribution\ margin}$

= $\frac{450}{0.25}$

= 1,800

Answer 2

The break-even point is 1,800 units.

What is the break-even point?

The break-even point refers to the point at which the total cost and total revenue are equal, which means there is neither profit nor loss.

The break-even point can be calculated as follows:

$\rm Break-even\: point =\dfrac{Fixed\:cost}{Contribution\:per\:unit}$

The contribution per unit can be calculated as:

$\rm Contribution = Selling \:price - Variable \:cost$

Given:

The selling price is $0.75 per unit

The variable cost is $0.20 per unit

The fixed cost is $450.00

The contribution per unit will be:

$\rm Contribution = Selling \:price - Variable \:cost\\\\\rm Contribution = \ 0.75-\ .050\\\\\rm Contribution = \ .025$

Therefore the break-even point will be:

$\rm Break-even\: point =\dfrac{Fixed\:cost}{Contribution\:per\:unit}\\\\\rm Break-even\: point =\dfrac{450}{0.25}\\\\\rm Break-even\: point =1,800\:units$

Therefore the break-even point is 1,800 units.

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