The Truck Toys Company manufactures traditional wooden toy trucks.It has determined its variable cost/unit to be $1.50/truck.Fixed costs, however, are quite high because old equipment is used in the manufacturing process and costly packaging is needed to market the toy trucks.The fixed costs are estimated at $11,000/month.The company sells their toy trucks at a price of $7.75/each.How many toy trucks must be sold annually to break even?

Question

Quizplus · Accepted Answer

To calculate the break-even point in units, use the formula: Break-even point in units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Here, Fixed Costs = $11,000/month, Selling Price per Unit = $7.75, and Variable Cost per Unit = $1.50. Thus, monthly break-even point = $11,000 / ($7.75 - $1.50) = $11,000 / $6.25 = 1,760 units. To find the annual break-even point, multiply the monthly break-even point by 12: 1,760 units * 12 months = 21,120 toy trucks.

The Truck Toys Company Manufactures Traditional Wooden Toy Trucks