Jane Corporation produces model toy cars. Each sells for $25.75. Its variable cost per unit is $12.44. Assuming it has a fixed cost of $264,869. What is the breakeven point for Jane Corporation?
Question
Jane Corporation produces model toy cars. Each sells for 12.44. Assuming it has a fixed cost of $264,869. What is the breakeven point for Jane Corporation?
Solution
The breakeven point is the point at which total revenue equals total costs, resulting in neither profit nor loss.
To calculate the breakeven point, we need to divide the fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit.
Contribution margin per unit = Selling price per unit - Variable cost per unit Contribution margin per unit = 12.44 Contribution margin per unit = $13.31
Breakeven point in units = Fixed costs / Contribution margin per unit Breakeven point in units = 13.31 Breakeven point in units ≈ 19,900 units
Therefore, Jane Corporation needs to sell approximately 19,900 model toy cars to break even.
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