Problem 15-1: Break-Even Quantity Shapland Inc. Has Fixed Op

Problem 15 1 Break Even Quantity Shapland Inc Has Fixed Operating C

Shapland Inc. has fixed operating costs of $550,000 and variable costs of $41 per unit. If it sells the product for $85 per unit, what is the break-even quantity?

Paper For Above instruction

The calculation of the break-even quantity is fundamental for understanding the sales volume a company needs to cover its fixed and variable costs without making a profit or loss. For Shapland Inc., the fixed costs are $550,000, and the variable costs per unit are $41, with a selling price of $85 per unit. The break-even point occurs when total revenue equals total costs, which can be expressed with the formula:

Break-even quantity = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

Applying the given data:

Break-even quantity = $550,000 / ($85 - $41) = $550,000 / $44 ≈ 12,500 units

This means Shapland Inc. needs to sell approximately 12,500 units to cover all its costs, after which it will start generating profit. Understanding this threshold helps managers plan sales targets and evaluate pricing strategies.

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