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Ampro-Mag is a small company that makes materials for safely controlling hazardous spills of all kinds. It sells these items as a neutralizing kit priced at $120. The costs of the materials that go into each kit are $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising in trade journals, and $3,500 for the monthly salary of its owner. What is Ampro-Mag's monthly break-even point in terms of number of neutralizing kits sold?

Respuesta :

Answer:

69 units

Step-by-step explanation:

Data provided in the question:

Selling  cost = $120

Material cost = $45 per kit

Labor cost = $45 per kit

Thus,

Total variable cost = $45 + $5 = $50

Fixed costs:

Monthly expenses for rent and insurance = $1,000

Heat and electricity = $200

Advertising in trade journals = $500

Monthly salary of its owner = $3,500

Therefore,

Total fixed cost = $1,000 + $200 + $500 + $3,500

= $5,200

Now

let the break-even number of units be 'x'

At break-even point

Total revenue = Total cost

thus,

$120x = $45x + $5,200

or

( $120 - $45 )x = $5,200

or

$75x = $5,200

or

x = 69.33 ≈ 69 units

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