1. SEM2 3.02 Review

2. A product’s selling price is $30 per unit, and the number of units required to reach the break-event point is 100. Calculate the total dollar sales the business needs to break even.

3. Answer $3,000. The break even point is the point at which income from sales of a product equals the costs or producing and/or selling the product. Break-even in dollars is calculated by multiplying the number of units that must be sold to reach break-even by the selling price per unit (100 x $30 = $3,000)

4. A business purchases a line of items for resale that costs $1.32 each. Expenses total $.65 per item. What is the break- even price per item?

5. Answer $1.97. The break-even price is the price at which the business recovers the costs and expenses of producing and distributing a product ($1.32 + $.65 = $1.97). The business needs to know the total expenses involved in selling a product in order to set a selling price that will include a profit margin.

6. The variable cost for a product is $1.00 and the total fixed costs are $88,000. The company sells the products for $3.00 each. How many products will the company have to sell to break even?

7. Answer 44,000. Break-even is the point at which the business has recovered its costs and can expect to make a profit. The break-even point is determined by dividing the difference between variable costs and the selling price into the total fixed costs. In this case, $3.00 - $1.00 = $2.00; $88,000 ÷ $2.00 = 44,000.

8. A business decides to produce 6,000 football cushions and sell them for $6.00 each. They cost the company $4.00 each to produce. How many cushions must the company sell to break even?

9. Answer 4,000. Break-even is the point at which the business has recovered the costs of production and can begin to make a profit. To determine break-even in this case, multiply the number of cushions to be produced by the cost to produce each, then divide by the selling price to determine how many have to be sold to break even (6,000 x $4.00 = $24,000 ÷ $6.00 = 4,000).

10. Determine a firm's break-even point in units, given the following information: total fixed cost, $4,000; variable cost per unit, $20; and selling price per unit, $100.

11. Answer 50 units. Break-even point is the level of sales at which revenues equal total costs. It can be calculated in units or dollars. The formula for calculating break-even in units is: Break-even equals total fixed costs divided by the variable-cost margin. To determine the variable-cost margin, subtract the variable cost per unit from the selling price ($100 - $20 = $80). Then, divide the total fixed cost by the variable-cost margin to determine the break-even point in units ($4,000 ÷ $80 = 50 units).

12. A soccer camp provides five leaders at $8 per hour for eight hours a day for five days. If fringe benefits are 20% of the wages and supplies total $650, calculate the cost per person if 40 players attend.

13. Answer $64.25. To calculate cost per person, first determine total wages by multiplying the hourly rate by the number of hours worked per day and the number of leaders ($8 x 8 = $64; $64 x 5 = $320). Then, multiply the daily rate by the number of days ($320 x 5 = $1,600). To determine fringe benefits, multiply the total wages by 20% ($1,600 x 20% or.20 = $320). Add fringe benefits to total wages and the cost of supplies to determine the total price of the camp ($1,600 + $320 = $1,920; $1,920 + $650 = $2,570). To calculate cost per person, divide the total price by 40 ($2,570 ÷ 40 = $64.25).