What is the breakeven point for Rough and Tough Clothiers, maker of heavy-duty dungarees? It has the following

costs:

Raw materials: $15 per pair

Labor costs: $ 8 per pair

Commissions: $ 2 per pair

Utilities: $ 50,000

Rent: $ 96,000

Taxes: $ 30,000

Salaries: $150,000

The price of the dungarees is $55 per pair.

Question 17Answer

a.
17,650


b.
25,000


c.
10,867


d.
13,040

To calculate the breakeven point for Rough and Tough Clothiers, we need to first determine the total fixed costs and the variable costs per pair of dungarees.

### Step 1: Calculate Fixed Costs
Fixed costs are expenses that do not change with the number of units produced. Here are the fixed costs:

- Utilities: $50,000
- Rent: $96,000
- Taxes: $30,000
- Salaries: $150,000

**Total Fixed Costs = $50,000 + $96,000 + $30,000 + $150,000 = $326,000**

### Step 2: Calculate Variable Costs
Variable costs change with the number of units produced. Here are the variable costs per pair:

- Raw materials: $15
- Labor costs: $8
- Commissions: $2

**Total Variable Cost per pair = $15 + $8 + $2 = $25**

### Step 3: Calculate Selling Price
The selling price of the dungarees is $55 per pair.

### Step 4: Calculate Contribution Margin
The contribution margin is the selling price minus the variable cost per unit.

**Contribution Margin = Selling Price - Variable Cost = $55 - $25 = $30**

### Step 5: Calculate Breakeven Point in Units
The breakeven point in units is calculated by dividing the total fixed costs by the contribution margin.

**Breakeven Point (units) = Total Fixed Costs / Contribution Margin**

\[
\text{Breakeven Point} = \frac{326,000}{30} \approx 10,867
\]

### Conclusion
The breakeven point for Rough and Tough Clothiers is **10,867 pairs**. Therefore, the correct answer is:

**c. 10,867**

If you have any questions or need further details, let me know! Here are some related questions you might find interesting:

1. How does increasing the selling price affect the breakeven point?
2. What would happen to the breakeven point if variable costs increased?
3. How can Rough and Tough Clothiers reduce fixed costs to lower the breakeven point?
4. What is the impact of selling more than the breakeven point on profits?
5. How can calculating the breakeven point help in decision-making for new products?

**Tip:** Always analyze both fixed and variable costs when assessing profitability and pricing strategies.

What is the breakeven point for Rough and Tough Clothiers, maker of heavy-duty dungarees?

Discover how to calculate the breakeven point for Rough and Tough Clothiers, a maker of heavy-duty dungarees. With total fixed costs of $326,000 and a contribution margin of $30, the breakeven point is found to be 10,867 pairs.

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