Annie Tyme Clocks purchases a cuckoo clock from Switzerland, including insurance and shipping costs, for $620 per unit. The markup on the clock is 40% for a sales price of $868. Other traceable direct costs amount to $14 per unit. The indirect costs associated with this product amount to
$47,960. How many cuckoo clocks must Annie sell in order to break even?

Question

Quizplus · Accepted Answer

To break even, the total revenue generated from selling cuckoo clocks must be equal to the total cost incurred by Annie Tyme Clocks, which includes both direct and indirect costs.

Let's calculate the total cost per unit:

Total Cost = Direct Cost + Indirect Cost + Cost of Goods Sold

Direct Cost = $14 
Indirect Cost = $47,960/total units produced
Cost of goods sold = $620

So,

Total Cost = $14 + ($47,960/x) + $620 
Total Revenue = Sales Price * Number of Units Sold 
Total Revenue = $868 * x

Where x is the total units produced and sold.

To break even, Total Cost = Total Revenue

$14 + ($47,960/x) + $620 = $868 * x

Solving for x, we get x = 205

Therefore, Annie Tyme Clocks must sell 205 cuckoo clocks to break even.

Hence, the best choice is B) with the explanation above.

Annie Tyme Clocks Purchases a Cuckoo Clock from Switzerland, Including