TBS Toys purchases a product from overseas including insurance and shipping costs for $65 per unit.TBS marks the toy up 30% to $84.50.Other traceable direct costs amount to $4.50 per unit.The indirect costs associated with this product amount to $45,000.How many toys must TBS sell in order to break even?

Question

Quizplus · Accepted Answer

To calculate the break-even point, we need to determine the total cost per unit and the contribution margin per unit.

Total cost per unit:
- Purchase cost including insurance and shipping = $65
- Other traceable direct costs = $4.50
- Total = $69.50

Contribution margin per unit:
- Selling price = $84.50
- Total cost per unit = $69.50
- Contribution margin per unit = $15

Now we can calculate the break-even point:
- Fixed costs = $45,000
- Break-even point = Fixed costs / Contribution margin per unit
- Break-even point = $45,000 / $15 = 3,000 units

Therefore, TBS must sell 3,000 toys to break even. The correct choice is C.

TBS Toys Purchases a Product from Overseas Including Insurance and Shipping