Question
Imran Itd, manufactures and sells skateboards for teens. The business pays a monthly rent of ￡2,000. Each skateboard requires materials that cost 70. And takes 3 hours of labour, at a rate of ￡10/ph. The current selling price per skateboard is UND140 How many units does the business need to sell to reach their breakeven point? 10 units Cannot work out the breakeven point from the given information 40 units 50 units
Answer
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(189 Votes)
Yvette
Elite · Tutor for 8 years
Answer
**Step 1:** Variable Cost per unit = £70 (material per skateboard) + £30 (£10
3 hour per skateboard labor) The total Variable Cost per Skateboard = £100 **Step 2:** Contribution Margin Per Unit = £140 - £100So, the Contribution Margin Per Unit = £40**Step 3:**Then, we use this to find the breakeven point which is spaced as:Breakeven Point = £2000 (fixed costs)/ £40Thus, the firm needs to sell 50 units to reach their break-even point. So the the company wants to sell exactly 50 units.
Explanation
## Step 1: First, we need to calculate the total variable cost per unit. That would involve adding the cost of materials and labor fee.###
This involves multiplying the number of hours it takes to manufacture a unit and the rate of labour to get the labour cost.## Step 2: Now, we will calculate the contribution margin per unit. The contribution margin is the selling price per product minus the variable cost of product. ###
## Step 3: Finally, to calculate the number of units required to reach breakeven, we divide the total fixed cost by the contribution margin.###
This will yield the answer in terms of the number of skateboards.