Problem 713 Owen Conner works parttime packaging software fo

Problem 7-13 Owen Conner works part-time packaging software for a local distribution company in Indiana. The annual fixed cost is $15,000 for this process, direct labor is $4.25 per package, and material is $5.00 per package. The selling price will be $15.00 per package a. What is the break-even point in units? (Do not round intermediate calculations. Roundup your answer to the next whole number.) Break-even point units b. How much revenue do we need to take in before breaking even? (Round your answer to the nearest dollar amount.) Break-even point

Solution

Contribution = Selling price - Material - Direct Labour
= 15 - 5 - 4.25
= $ 5.75
Fixed cost = $ 15000
Break even units = Fixed cost/Contribution = 15000/5.75 = 2609 units
Break even revenue = Break even units * Selling price = 2609*15 = $39135