Ampro-Mag is a small company that makes materials for safely controlling hazardous spills of all kinds.It sells these items as a neutralizing kit priced at $120.The costs of the materials that go into each kit are $45.It costs $5 in labour 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)47 neutralizing kits
B)68 neutralizing kits
C)75 neutralizing kits
D)104 neutralizing kits

Question

Quizplus · Accepted Answer

To find the break-even point, calculate the total fixed costs and the contribution margin per kit. 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 the selling price ($120) minus variable costs ($45 materials + $5 labor) = $70. Break-even point = Total Fixed Costs / Contribution Margin per Kit = $5,200 / $70 = 74.29, rounded up to 75 kits.

Ampro-Mag Is a Small Company That Makes Materials for Safely