Zada sells decorative seasonal wreaths at a local flea market. The rent for a booth at the flea market is $100 per month. The variable cost for assembling each wreath is $6. The selling price for each wreath is $10. Last month Zada had someone sell for him. For every basket she sells, his assistant earns 10 percent of the sales price. Calculate the break-even point in units for last month.

Question

Quizplus · Accepted Answer

The break-even point in units can be calculated using the formula: Break-even point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit - Commission per Unit). The commission per unit is 10% of $10, which is $1. So, the calculation is $100 / ($10 - $6 - $1) = $100 / $3 = 33.33 units. Since Zada cannot sell a fraction of a wreath, she needs to sell 34 wreaths to break even.

Zada Sells Decorative Seasonal Wreaths at a Local Flea Market