The Francesco Company produces spaghetti sauce that is used in restaurants. The fixed costs total $1,329,050. The selling price per 64 oz. can of sauce is $12.40. The variable cost per can is $4.80. What is the break-even point in number of cans?
The Francesco Company produces spaghetti sauce that is used in restaurants. The fixed costs total $1,329,050. The selling price per 64 oz. can of sauce is $12.40. The variable cost per can is $4.80. What is the break-even point in numBer
To find the break-even point in number of cans, we need to determine the number of cans that need to be sold in order to cover the total costs.
The break-even point can be calculated using the following formula:
Break-even point (in units) = Total Fixed Costs / Contribution Margin per unit
First, let's calculate the contribution margin per unit.
Contribution margin per unit = Selling price per unit - Variable cost per unit
In this case:
Selling price per can = $12.40
Variable cost per can = $4.80
Contribution margin per can = $12.40 - $4.80 = $7.60
Now, let's calculate the break-even point in number of cans:
Break-even point (in cans) = Total Fixed Costs / Contribution Margin per can
Total Fixed Costs = $1,329,050
Break-even point (in cans) = $1,329,050 / $7.60
Break-even point (in cans) = 174,858.55 cans
Since we can't have a fraction of a can, the break-even point in number of cans is rounded up to the nearest whole number.
Therefore, the break-even point is 174,859 cans.