Harmony Company sells hand-knit scarves.Each scarf sells for $40.The company pays $60 to rent vending space for one day.The variable costs are $15 per scarf.How many scarves should the company sell each day in order to break even? (Round your answer up to the nearest whole scarf.)

Question

Quizplus · Accepted Answer

Required sales in units = (Fixed costs + Target profit) / Contribution margin per unit
Unit contribution margin = Net sales revenue per unit - Variable costs per unit
Unit contribution margin = $40 - $15 = $25 per scarf
Required sales in units = ($60 + $0) / $25 = 3 scarves (rounded)

Harmony Company Sells Hand-Knit Scarves