Apprentice Mousetraps has developed the Magic Mouse Trapper

Apprentice Mousetraps has developed the Magic Mouse Trapper. The company’s fixed costs are $30,000 per week. The product sells for $20. Initially, the company estimated that it would cost $5 per unit to make each mousetrap. After one week in production, however, the company realized that its actual cost to make each unit was $7.25. What are the weekly volumes that a) Apprentice originally thought it needed to produce to break even, and b) Apprentice actually needs to produce to break even?

2,000 and 2,353 mousetraps

1,000 and 2,000 mousetraps

2,353 and 4,000 mousetraps

2,000 and 3,000 mousetraps

Solution

In case A

Breakeven = fixed cost / contribution margin Per unit

Contribution margin Per unit = selling price per unit - variable cost per unit = 20-5 =15

Breakeven point in units = 30000/15 =2000 mousetraps

In case B

Contribution margin Per unit = 20-7.25 =12.75

Breakeven point in units = 30000/12.75 = 2353 mousetraps

Therefore answer is option A 2000 and 2353 mousetraps