Question

Cathy's Towels sells three items (which it purchases from a supplier): bath towels Each bath towel sells for $10 and costs $4, each hand towel sells for $5 and costs $2, and each washcloth sells for $2.50 and costs $1. The shop's a rate, t is 40%. How many bath towels must the firm sell at the breakeven point?
1. 20.000.
2. 36.000
3. 44,000.
4. 51.000.
5. 81.000.

Answer 1

Answer:

2. 36.000

Explanation:

                                   Bath Towel     Hand Towel     Washcloth

Price Each Towel       =      $10                    $5                  $2.50

-Variable cost             =       $4                     $2                  $1.00

=Contribution Margin =       $6                     $3                  $1.50

Sales Ratio                  =       4             :            3           :            2       = 9

Contribution per batch=     $24                     $9                   $3        = $36

Fixed Cost = $324,000

Break-even Point (Batches) = Fixed Cost / Total Contribution per batch

Break-even Point (Batches) = $324,000 / $36 = 9000 Batches

Sale of Bath Towel at break even = 4 x 9,000 = 36,000 units