Breaking Down Break-Even Point Analysis for Hammerhead Charters

How many trips must Hammerhead sell to break even?

The number of trips that Hammerhead must sell to get break even is 200 trips.

Explanation:

Calculation of Break Even Point:
Break Even Point = Fixed Cost divided by Contribution Per Unit
The given data : Fixed Cost = $6,000
Contribution Per Unit = Selling Price minus Variable cost per unit
Thus, Contribution Per Unit = $50 - 20 = $30
Break Even Point = 6,000 / 30 = 200 trips
Thus, the number of trips that Hammerhead must sell to get break even is 200 trips.

Final answer:

Hammerhead Charters must sell 200 trips to break even. This is calculated using the formula: Fixed Costs / (Selling Price per Unit - Variable Cost per Unit), substituting in the given values.

To calculate the break-even point for Hammerhead Charters, we need to understand the basic concept of break-even analysis in the context of business. The break-even point is the point at which total revenue equals total costs, yielding no profit and no loss. In this situation, the fixed costs are $6,000 per month, the variable costs per trip are $20, and the revenue per trip is $50.

The formula to calculate the break-even point in units (here, number of trips) is: Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). In this case, the Selling Price per Unit is $50, the Variable Cost per Unit is $20 and the Fixed Costs are $6,000. Substituting these values into the formula, we get: 6,000 / (50 - 20) = 200 trips. Therefore, Hammerhead Charters must sell 200 trips to break even.