What is the minimum number of parts the company must sell to break even?

Question

A company manufactures replacement parts for construction cranes. The fixed manufacturing cost is $2,400, and the variable cost per part is $5.50. Each part is sold at $8.50. What is the minimum number of parts the company must sell to break even?

Answer 1

TC = Total Cost = $2400 + $5.50*P       where P = number of parts

 

TS = Total Sales = $8.50*P

 

Break even is when total cost is equal to total sales, therefore set TC = TS  and solve for P (number of parts)

 

$2400 + $5.50*P  =  $8.50*P

 

$2400 = $3.00*P

 

P = $2400/$3.00 = 800 parts must be sold to break even