Question

Marcy’s company produces grandfather clocks. Each clock costs them $164 to make, and they can sell a clock for $625. If their annual overhead costs, not counting the cost to produce the clocks, comes to $96,000, how many clocks must Marcy’s company sell each year to break even? Round to the nearest whole clock, if necessary. a. 122 b. 154 c. 208 d. 293 Please select the best answer from the choices provided A B C D

Answer 1

Answer:

Ans. C) 208 grandfather clocks to break even

Explanation:

Hi, First, let´s introduce the Break-even point (BEP) in units equation that we need to use.

$BEP=\frac{FixedCosts}{(Price-VarCost)} =[units]$

Therefore, our solution has to look like this:

$BEP(Units)=\frac{96,000}{(625-164)} =208(rounded)$

So, in order to break-even, this company has to sell 208 clocks each year.

Note. 208 was the value obtained when the answer was rounded to the nearest unit.

If you´d like to know how much is that in dollars, you just go ahead and multiply the price by 208 and you will get.

$BEP(dollars)=208Units*\frac{625Dollars}{Unit} =130,000$

Best of luck.