Question

a manufacturer of games sell each copy for 21.95.the manufacturing cost of each copy is 14.92. monthly fixed cost is 8500. during the 1st month of sales of a new game,how many copies must be sold in order to get break-even(that is,in order that total revenue equal total cost)?

Answer 1

The break-even point is calculated as -

Break-even point (in units) = Fixed cost ÷ Contribution margin per unit

Here,

Selling price = $ 21.95

Variable cost (manufacturing costs) = $ 14.92 (since, costs bifurcation is not given, the manufacturing costs are taken as variable costs)

Contribution per unit = Selling price - Variable cost (manufacturing costs)

Contribution per unit = $ 7.03

Fixed cost (monthly) = $ 8500

Now,

Break-even point (in units) = $ 8,500 ÷ $ 7.03

Break-even point (in units) = 1,209.1 or 1210 games