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 labour 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?
A)75 neutralizing kits
B)68 neutralizing kits
C)104 neutralizing kits
D)47 neutralizing kits

Question

Quizplus · Accepted Answer

To calculate the break-even point, first determine the total fixed costs and the profit per unit. Fixed costs are $1,000 (rent and insurance) + $200 (heat and electricity) + $500 (advertising) + $3,500 (salary) = $5,200. The profit per unit is the selling price minus the variable costs, which are $120 (selling price) - $45 (materials) - $5 (labour) = $70. The break-even point in units is the fixed costs divided by the profit per unit, so $5,200 / $70 = 74.28, which rounds up to 75 kits.

Ampro-Mag Is a Small Company That Makes Materials for Safely