Question

A company manufactures replacement parts for construction cranes. The fixed manufacturing cost is $2,400 and the variable cost per part is $5.50. Each part is sold at $8.50.
The minimum number of parts the company must sell to break even is___?

Answer 1

The cost to the company =
$5.50 per part for x parts
$2,400 manufacturing
The money earned by the company =
$8.80 per part for x parts
For break even situation, the earnings must equal the cost:
8.80x = 5.50x + 2400
3.30x = 2400
x = 727.27
The company must sell 728 parts to break even (because 0.27 part cannot be sold)