Answer:
in units: 18,900
in dollars: $ 41,013
Step-by-step explanation:
The break even point is the sales dollar amount or sales in unit at whichthe operating income of the firm equals to zero:[tex]\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units }[/tex]
Where:
[tex]\frac{Contribution \: Margin}{Sales \: Revenue} = Contribution \: Margin \: Ratio[/tex]
Contribution margin:
2.17 - 1.27 = 1 dollar per unit
Break even:
$18,900 fixed cost / $1 per unit = 18,900 units
Then, in sales:
18,900 x $2.17 each = 41.013
break even point:
Answer: Pete's corporation would break even when they sell 21000 bags of peanuts.
Step-by-step explanation:
Let x represent the number of bags of peanuts that Pete corporation would produce and sell to break even.
The fixed cost of production is $18,900 while the unit cost of producing a bag of peanut is $1.27. This means that the total cost of producing x bags of peanuts would be
1.27x + 18900
Each bag sells for $2.17. This means that the total revenue selling from x bags of peanuts would be
2.17x
At the point of break even, total cost of production = total revenue. Therefore,
1.27x + 18900 = 2.17x
2.17x - 1.27x = 18900
0.9x = 18900
x = 18900/0.9
x = 21000
