Ampro-Mag makes materials for safely controlling hazardous spills of all kinds. It sells these items as a neutralizing kit priced at $100. The costs of the materials that go into each kit are $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising in trade journals, and $3,500 for the monthly salary of its owner. What is Ampro-Mag's monthly break-even point in terms of number of neutralizing kits sold?
A) 40 kits
B) 52 kits
C) 104 kits
D) 116 kits
E) 520 kits

Question

Quizplus · Accepted Answer

The break-even point is calculated by dividing total fixed costs by the contribution margin per unit. Fixed costs are $1,000 (rent and insurance) + $200 (heat and electricity) + $500 (advertising) + $3,500 (owner's salary) = $5,200. The contribution margin per kit is $100 (price) - $45 (materials) - $5 (labor) = $50. Therefore, the break-even point is $5,200 / $50 = 104 kits.

Ampro-Mag Makes Materials for Safely Controlling Hazardous Spills of All