Harmony Company sells hand-knit scarves. Each scarf sells for $40. The company pays $60 to rent vending space for one day. The variable costs are $15 per scarf. How many scarves should the company sell each day in order to break even? (Round your answer up to the nearest whole scarf.)
A) 2 scarves
B) 3 scarves
C) 20 scarves
D) 4 scarves
B) 3 scarves
Required sales in units = (Fixed costs + Target profit) / Contribution margin per unit
Unit contribution margin = Net sales revenue per unit - Variable costs per unit
Unit contribution margin = $40 - $15 = $25 per scarf
Required sales in units = ($60 + $0) / $25 = 3 scarves (rounded)
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