Altratex is the manufacturer of electronic power stabilizers.The company has spent $50,000 toward the purchase of capital goods and machinery.It has also paid $8,000 toward annual building maintenance and $1,500 for annual insurance premium.The company has 15 permanent employees who earn an annual salary of $1,500 each.The other variable costs for producing a stabilizer is $15.How many units should the company sell in order to recover its investment if each unit is priced at $40?

Question

Quizplus · Accepted Answer

To calculate the break-even point, we first need to determine the total fixed costs and the contribution margin per unit. Fixed costs include the purchase of capital goods and machinery ($50,000), annual building maintenance ($8,000), annual insurance premium ($1,500), and salaries for the 15 permanent employees ($1,500 each, totaling $22,500). Therefore, the total fixed costs are $50,000 + $8,000 + $1,500 + $22,500 = $82,000. The contribution margin per unit is the selling price per unit minus the variable cost per unit. Given that each unit is sold for $40 and the variable cost per unit is $15, the contribution margin per unit is $40 - $15 = $25. To find the break-even point in units, divide the total fixed costs by the contribution margin per unit: $82,000 / $25 = 3,280 units.

Altratex Is the Manufacturer of Electronic Power Stabilizers