A fabric manufacturer is doing a breakeven analysis of oilcloth. It costs $15.00 to manufacture a metre of oilcloth. Customers will pay $25 a metre for oilcloth. The company's fixed costs are $10,000. How many metres must the fabric manufacturer sell to break even?
A) 400
B) 667
C) 1,000
D) 10,000

Question

Quizplus · Accepted Answer

To break even, the total revenue must equal total costs.

Let x be the number of metres the fabric manufacturer must sell to break even.

Total cost = fixed cost + variable cost 
Variable cost = cost per metre * number of metres 
Fixed cost = $10,000 
Cost per metre = $15.00

Total cost = $10,000 + ($15.00 * x)

Total revenue = price per metre * number of metres 
Price per metre = $25.00

Total revenue = $25.00 * x

To break even: 
Total revenue = Total cost 
$25.00x = $10,000 + ($15.00x)

$10.00x = $10,000

x = 1,000 metres

Therefore, the fabric manufacturer must sell 1,000 metres of oilcloth to break even.

A Fabric Manufacturer Is Doing a Breakeven Analysis of Oilcloth