Question

The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $35andhasavariablecostof$22. There are $97,500 in fixed costs involved in the production process.

a. Compute the break-even point in units.

Short answer

Break-even point of the company is 7,500 units.

Step-by-step solution

Variable cost

Variable cost means the cost which fluctuates with the changes in the sales or production volume of the company. Production cost, delivery cost, packaging supplies, etc., are examples of the variable cost.

Break even point (in units)

$\begin{array}{rcl}\mathrm{Break}\mathrm{even}\mathrm{point}& =& \frac{\mathrm{Fixed}\mathrm{cost}}{\left(\mathrm{Revenue}\mathrm{per}\mathrm{unit}-\mathrm{Variable}\mathrm{cost}\mathrm{per}\mathrm{unit}\right)}\\ & =& \frac{\$97,500}{\left(\$35-\$22\right)}\\ & =& 7,500\mathrm{units}\end{array}$