Question

A company that produces custom bike license plates spends $5525 per month in building overhead plus $2.50 per license plate. if the plates sell for $5.99, how many plates must the company sell each month before making profit?

Answer 1

Calculation of Breakeven Point:

The breakeven point (units) can be calculated using the following formula:

Breakeven Point (Units) = Total Fixed cost/ (Selling Price- Variable Cost)

It is given that the company produces custom bike license plates and spends $5525 per month in building overhead plus $2.50 per license plate. The plates sell for $5.99 each.

Hence,

Breakeven Point (Units) = 5525 / (5.99-2.50) = 1583.09

Hence we can say that the company must sell 1583 plates each month before making the profit.