As a graphic artist, Nate has just finished producing a new calendar. His calendar cost him $1.00 for the shiny paper, $2.00 for the six color production, and $.25 for the plastic wire that holds it together at the top. The labor in developing the design was 4 hours of work at $50/hour, and labor is being added to the rest of the fixed costs of $400.00. At a price of $12.00 per calendar, how many calendars will Nate need to produce and sell in order to break even (cover all his costs, but not make a profit)?

Question

Quizplus · Accepted Answer

To break even, Nate needs to cover all of his costs, which include both fixed costs (such as labor and the plastic wire) and variable costs (such as the shiny paper and color production).

Variable costs per calendar: $1.00 + $2.00 + $0.25 = $3.25
Fixed costs: $400 + ($50/hour x 4 hours) = $600

Total cost per calendar: $3.25 + $600 (fixed cost/total # of calendars produced)

To break even:
Selling price per calendar = Total cost per calendar
$12.00 = $3.25 + ($600/x) 
Solving for x:
$8.75 = $600/x
x = 69

Therefore, Nate needs to produce and sell 69 calendars in order to break even.

As a Graphic Artist, Nate Has Just Finished Producing a New