Question

You company sells inflatable suitcases that get bigger or smaller depending on the amount of clothing inside them.  Each suitcase costs $13 to manufacture, and you sell them for an average of $99 per unit. It costs $6,913 per day to operate your factory.

How many units per day do you need to sell to break even?

Answer 1

Cost to manufacture each suitcase = $13

Average selling price per suitcase = $99

Contribution per suitcase = $99 - $13 = $86

Fixed cost = cost to operate factory per day = $ 6913

Break even sales : Sales at which the revenue equals the total cost is called break even sales. Implies contribution should equal to fixed cost

Let “x” be number of units at which break even sales occur

Implies, Contribution per unit * x = 6913

86 * x = 6913

x = 6913/86

x = 80.38

Since one can’t sell part of the suitcase, it is 81 suitcases

Therefore, units per day to sell to break even = 81 suitcases