Answer:
revenue we need to take in before breaking even = $1,250 × 8 = $10,000
Break-even units = 9
Explanation:
Data provided in the question:
Annual fixed cost = $10,000
Direct labor cost = $3.50 per package
Material cost = $4.50 per package
Selling price = $1,250
Now,
let the break-even units be 'x'
Thus,
total cost = $10,000 + $3.50x + $4.50x
or
total cost = $10,000 + $8x
also,
total revenue = $1,250x
now,
at break-even
total cost = Total revenue
or
$10,000 + $8x = $1,250x
or
$1250x - $8x = $10,000
or
$1,242x = $10,000
or
x = 8.05 ≈ 9 packages
at 9 packages, we have break-even revenue
Therefore,
revenue we need to take in before breaking even = $1,250 × 8 = $10,000
