getting negative number for break-even dollars
The scenario is the following:
You want to open up a custom skateboard shop. You can sell each skateboard for $160. It takes 3 hours to make each skateboard. Each skateboard maker earns $25 per hour. Each skateboard costs $15 in raw materials. You estimate that your fixed costs are $20,000 per month.
What is the break-even dollar amount?
I have done this:
BE$= FC / (1 – (VC/P))
BE$= 20,000/ (1-(160/90))
BE$= -25,714.29
I got VC=90 since:
$15 in raw materials + ($25 x 3 hrs that take to make 1 skateboard) = $90
But I know I'm doing something wrong since there's no logic in getting a negative number for the break-even dollars.
Help?