A company has been making surfboards for many years. The monthly overhead is $48,200 and each surfboard costs $221 in materials and labor to make. If these items are sold for $261 (a) What is the profit in dollars if 216 surfboards are made and sold? (Enter value but omit dollar sign.) (b) How many surfboards must be sold to break even? Note: Coursepack page 83, EX 8.6

Profit- $(39560)

Break-even  units=1,205 units

Explanation:

The profit in dollar would be determined as follows:

Profit = total contribution - Fixed costs

Total contribution = sales revenue - variable cost

Total contribution = ($261× 216) - (221× 216)

                              = $8,640

Profit = 8, 640 - 48200= $(39560)

Break-even  units

The number of units to be sold to break even will be determined as follows:

Units to break-even = Fixed cost /(selling price - variable cost)

= 48,200/(261-221)

=1,205 units

a.There is a monthly loss of 49505 if 216 units are sold per month.

b. The break even in units is 1205 units.

Explanation:

a.

Profit is a function of Revenue less total costs. The revenue is calculated by multiplying the selling price by the quantity sold.

The revenue at 216 units is = 216 * 261 = 56376

The total cost at 216 units = 48200 + 221 * 261 = 105881

The profit/loss at 216 units = 56376 - 105881 = -49505

Thus, there is a loss of 49505 at production and sale of 216 units.

b.

The break even in units can be calculated by dividing the Foxed costs/overheads by the contribution margin per unit.

The contribution margin per unit = Selling price per unit - variable cost per unit

Break even in units = Fixed cost or Overheads  /  Contribution margin per unit

The contribution margin = 261 - 221 = 40 per unit

Break even in units = 48200 / 40 = 1205 units per month

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