Scenario

You are a bookkeeper at a small manufacturing company called "Tech Gear Pro." The company specialises in producing high-quality electronic gadgets. Recently, the management has been considering introducing a new product line, "Smart Fit," which is a wearable fitness tracker. The company's management is seeking your expertise as an accountant to determine the break-even point for the new product.

Financial details:

• The total fixed costs related to launching the "Smart Fit" product line, including research and development expenses, marketing costs, and additional production facilities, amount to $50,000 per month.
• The variable cost per unit for each "Smart Fit" fitness tracker, which includes materials, labour, and overhead costs, is estimated to be $30.
• The company plans to sell each "Smart Fit" fitness tracker for $80.

Instructions

Based on the financial details provided in the scenario, calculate the break-even point for "Tech Gear Pro's" new product line, "Smart Fit". Show your working.

Break-Even Point Formula:

Break-Even Point (in units) = Total Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)