Question
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
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) |
Step by Step Solution
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