Owen Connor works part time packaging software for a local distribution company in Indiana. The annual fixed cost is $20,000 for this process, direct labor is $4.5 per package, and material is $2.5 per package. The selling price will be $12.0 per package. 
a. How much revenue do we need to take in before break-even?


To calculate the break-even revenue, we first need to determine the **break-even point** in terms of the number of packages. The break-even point occurs when total revenue equals total costs.

### Steps:
1. **Fixed costs**: $20,000 annually.
2. **Variable cost per package**: 
   - Direct labor: $4.5
   - Material: $2.5  
   - **Total variable cost per package**: $4.5 + $2.5 = $7.0
3. **Selling price per package**: $12.0

### Formula for Break-Even Quantity:
\[
\text{Break-Even Quantity} = \frac{\text{Fixed Costs}}{\text{Selling Price per Package} - \text{Variable Cost per Package}}
\]
\[
\text{Break-Even Quantity} = \frac{20,000}{12 - 7} = \frac{20,000}{5} = 4,000 \text{ packages}
\]

### Break-Even Revenue:
Once we have the break-even quantity (4,000 packages), we can calculate the **break-even revenue**:

\[
\text{Break-Even Revenue} = \text{Break-Even Quantity} \times \text{Selling Price per Package}
\]
\[
\text{Break-Even Revenue} = 4,000 \times 12 = 48,000
\]

Thus, **Owen Connor needs to take in $48,000 in revenue to break even**.

Would you like more details on any step or further clarification?

Here are 5 related questions to consider:
1. How many packages need to be sold to achieve a profit of $10,000?
2. What is the total cost of producing 5,000 packages?
3. What is the profit if Owen sells 6,000 packages?
4. How does an increase in fixed costs affect the break-even point?
5. What happens if the selling price per package is reduced to $10?

**Tip**: Always differentiate between fixed and variable costs when calculating break-even points.

Owen Connor works part time packaging software for a local distribution company in Indiana. The annual fixed cost is $20,000 for this process, direct labor is $4.5 per package, and material is $2.5 per package. The selling price will be $12.0 per package. How much revenue do we need to take in before break-even?

Calculate how much revenue is needed to break even when packaging software for a distribution company. This problem involves analyzing fixed costs, variable costs, and selling price per package to find the break-even revenue. Learn step-by-step how to solve this using cost analysis and linear equations.

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