What Is the Breakeven Point in Dollars for Zippy Dippy

question 16

Multiple Choice

What is the breakeven point in dollars for Zippy Dippy Swimwear, makers of bathing suits and accessories? They have the following costs:
$$\begin{array} { l l } \text { raw materials: } & \$ 25 \text { per bathing suit } \\& \$ 8 \text { per towel } \\& \$ 16 \text { per beach umbrella } \\& \$ 37 \text { per swimsuit cover-up } \\& \$ 18 \text { average per suit } \\& \$ 10 \text { per umbrella } \\& \$ 3 \text { per towel } \\\text { labor costs: } & \$ 20 \text { per cover-up } \\& \$ 12 \text { per item } \\& \$ 150,000 \\& \$ 196,000 \\\text { commissions: } & \$ 230,000 \\\text { utilities: } & \$ 550,000 \\\text { rent: } & \text { taxes: } \\\text { salaries: } & \text { The price of each suit is } \$ 85 . \\\text { The price of each towel is } \$ 25 . \\\text { The price of each umbrella is } \$ 40 . \\\text { The price of each cover-up is } \$ 81 .\end{array}$$

• A)$3,172,024
• B)$4,947,196
• C)$7,887,259
• D)$6,425,583

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Definitions:

Marginal Cost

The rise in overall expenses resulting from the manufacture of an extra unit of a good or service.

Average Variable Cost

The total variable cost divided by the quantity of output, representing the variable cost per unit of output produced.

Marginal Cost

The expenditure involved in creating an additional product unit.

Total Variable Cost

The sum of all costs that vary with the level of output, including costs like raw materials and direct labor.