Question

. A computer rework center has the capacity to rework 300 computers per day. The expected number of computers needing to be reworked per day is 225. The center is paid $26 for each computer reworked. The fixed cost of renting the reworking equipment is $250 per day. Work space rents for $150 per day. The cost of material is $18 per computer and labor costs $3 per computer. What is the break-even number of computers reworked per day?

Answer 1

Answer:

The break-even number of computers reworked per day is 80.

Step-by-step explanation:

The break-even number of computers reworked per day represents the number of computers that makes the total revenue equals the total expenditure.

Let the break-even number of computers reworked per day be y

Revenue for each computer reworked = $26

Total revenue for y computers reworked = $26y

Fixed cost of renting the reworking equipment per day = $250

Work space rent per day = $150

Cost of material per computer = $18

Cost of material for y computers = y × $18 = $18y

Labor cost per computer = $3

Labor cost for y computers = $3y

Total expenditure = $250 + $150 + $18y + $3y = $400 + $21y

Total revenue = total expenditure

$26y = $400 + $21y

$26y - $21y = $400

$5y = $400

y = $400/$5 = 80

Answer 2

Answer: Break even point is 80 computer to be reworked per day to cover all expenses and break even.

Step-by-step explanation:

Given:  $250 per day equipment rental per day is the fixed cost of reworking computers.

               $150 per day Rental for space to rework computers which is also a fixed cost.

                $26 per computer reworking selling price as the service of reworking is sold per computer                    which is a variable cost.

                $18 per computer for cost of material to rework the computer which is a variable cost.

                $3 per computer is the cost of labour per reworked which is a variable cost.

NB  

The identification between fixed and variable costs is like this. Fixed costs are those costs that do not vary or change due to the number of units sold or produced. Variable costs are those costs directly involved with the selling or producing of a product so they vary with the number of units sold or bought.

Break-even point = fixed costs/ (selling price per unit –variable costs per unit)

This is the formula we will use to calculate the Break-even point which is the number of computers the company needs to rework to cover the costs they have and earn $0 profit.

Substitute the above mentioned values:

Break-even point = ($150 per day+ $250 per day)/ ($26 per unit – ($18 per unit+$3 per unit))  

Break-even point = $400 per day/ $5

Break-even point = 80 units per day

The company must rework 80 computers to cover all expenses in the business per day.