show work Question 1 An entrepreneur is trying to conduct a break - even analysi

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Question 1 An entrepreneur is trying to conduct a break - even analysis. Each product will sell for a price of $19.95. The entrepreneur has estimated the following costs A. Rent $ 1,000 per month B. Direct labor will be $3 per unit C. Salaries will be $500 per week D. Raw materials will cost $1 per unit Calculate the monthly break - even point, show the formula, your work, and identify the marginal contribution TFC = $3,000 per month VC = $4 per unit SP = $19.95 per unit MC = $15.95 per unit B/E = 188 units per month

Explanation / Answer

Total fixed costs TFC = Rent + salaries per month

= 1000 + 500 * 4

= $3000

total variable cost = Direct labor + Raw materials

= $4 per unit

selling price = 19.95

Marginal cost per unit = Seling prrice per unit - variable cost per unit

= 19.95 - 4

= $15.95

Break even units = Fixed cost/marginal Cost Per unit

= 3000/15.95

= 188.08

= 188 units .................ans

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