Question

Laguna Print makes advertising hangers that are placed on doorknobs. It charges $0.04 and estimates its variable cost to be $0.01 per hanger. Laguna’s total fixed cost is $4,500 per month, which consists primarily of printer depreciation and rent. Calculate the number of advertising hangers that Laguna must sell in order to break even.

Answer 1

Answer:

Break-even point= 150,000 hangers

Explanation:

Giving the following information:

It charges $0.04 and estimates its variable cost to be $0.01 per hanger. Laguna’s total fixed cost is $4,500 per month.

To calculate the number of hangers we need to use the following formula:

Break-even point= fixed costs/ contribution margin

Break-even point= 4,500 / (0.04 - 0.01)= 150,000 hangers