Sonicmony Soft, makes designer gold bracelets. Its annual costs include shop rent of $15,000, salaries for two jewelers of $125,000, design software costs of $12,000, and other overhead costs of $15,000. An average bracelet is priced at $6,500. It costs $2,200 in raw material, $1,500 in labor, and $400 in other expenses. What is the minimum number of bracelets that need to be sold to earn a profit? (Round to nearest whole unit.)

Question

Quizplus · Accepted Answer

To calculate the minimum number of bracelets needed to earn a profit, we need to first calculate the total fixed costs and variable costs per unit.

Total fixed costs = Shop rent + Salaries + Design software costs + Other overhead costs
Total fixed costs = $15,000 + $125,000 + $12,000 + $15,000
Total fixed costs = $167,000

Variable cost per unit = Raw material cost + Labor cost + Other expenses
Variable cost per unit = $2,200 + $1,500 + $400
Variable cost per unit = $4,100

To break even, the revenue generated from selling each bracelet should cover both fixed and variable costs. Let's calculate the break-even point:

Breakeven = Total fixed costs / (Price per unit - Variable cost per unit)
Breakeven = $167,000 / ($6,500 - $4,100)
Breakeven = 69.92

Since we can't sell a fraction of a bracelet, we need to round up to the nearest whole unit. That gives us a minimum of 70 bracelets that need to be sold to earn a profit.

Therefore, the best choice is C) 70 bracelets.

Sonicmony Soft, Makes Designer Gold Bracelets