Answer: 80 computers per day
Explanation:
In calculating the break-even point, it important to consider two types of costs. There are fixed costs, costs that don´t change no matter what happens with demand (in this case computers to be fixed), and variable costs, that varies depending on the demand.
Fixed costs:
Equipment Rent: 250
Space Rent: 150
Variable Costs:
Material per computer: 18
Labor per computer: 3
We have to pay $400 no matter what, and more depending on how many pcs are fixed. Now it’s a matter of calculating how many pcs are necessary to pay for that fixed costs and the variable costs that will come with it.
If there were no variable costs, the break-even point would be 16 pcs [16*26=416] (a little more than 15 but u can’t fix half of a pc lol).
However, knowing that the cost per pc is $21, we realize that we earn only $5 per pc. And how many $5 there are in $400? 80 pcs!
Phew! Let’s recap:
80 pcs fixed: $2080 revenue
Variable Cost: 21*80 = $1680
Fixed Cost: $400
2080 – 1680 – 400 = 0. Break-even!
As a side note: in this case, the center capacity is irrelevant because we can break-even well beneath the limit. However, in order to maximize profits, it would be a important data to work with.
