In: Finance
The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $23 and has a variable cost of $13. There are $25,000 in fixed costs involved in the production process.
a. Compute the break-even point in units.
b. Find the sales (in units) needed to earn a profit of $20,200.
a. Break-even point in units = Fixed costs / (Selling price - Variable cost)
Break-even point in units = $25,000 / ($23 - $13)
Break-even point in units = 2,500 units
b. Sales (in units) needed to earn a profit = (Fixed costs + Desired profit) / (Selling price - Variable cost)
Sales (in units) needed to earn a profit = ($25,000 + $20,200) / ($23 - $13)
Sales (in units) needed to earn a profit = 4,520 units