Question

Northwest Molded molds plastic handles which cost $0.80 per handle to mold. The fixed cost to run the molding machine is $2105 per week. If the company sells the handles for $1.80 each, how many handles must be molded and sold weekly to break even?

Answer 1

Answer:

2105 units per week

Explanation:

At the break-even point, Northwest will not make any profits or losses. Using the variable cost analysis, At the break-even point, Sales match variable costs plus fixed costs.

The break-even point is calculated as fixed costs/ contribution margin per unit.

Contribution margin per unit = sales - variable costs

=$1.80 -$0.80= $1.0

Contribution margin = $1.0Break even = $2105 /$1.

=2105 units