Your Memory Lane produces custom-made art prints that include graphics and icons to celebrate life’s special moments. For example, on his wedding anniversary, David had an art print produced that celebrated highlights of his ten years with his wife, Kathy. Suppose that Your Memory Lane sells the custom artwork for $500. It estimates its average variable costs to be $200 per unit produced. It figures its fixed costs to be $900,000 per year. How many prints does it have to sell to break even?

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andromache andromache · Answer 1 · 2019-12-20T05:35:25+01:00

Answer:

3,000 prints

Explanation:

In this question we use the formula of break-even point in unit sales which is shown below:

= (Fixed cost) ÷ (Contribution margin per unit)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $500 - $200

= $300

And, the fixed cost is $900,000

Now put these values to the above formula

So, the value would equal to

= ($900,000) ÷ ($300)

= 3,000 prints