Henry’s Hoodies produces a variety of sweatshirts for college students. Henry’s produces sweatshirts in batches and currently produces five batches per year. The company’s controller recently implemented an activity-based costing system and would like to calculate breakeven sales for the owner under this new costing system. He has prepared the following representative data:
Average sweatshirt sales price ........ $ 40.00
Direct materials (per unit) ......... $ 4.50
Direct labor (per unit) .......... $ 5.00
Variable overhead (per unit) ......... $ 0.50
Setup cost (per batch) ...................... $ 2,500
Fixed costs (in total) ............ $ 42,000
Calculate the number of sweatshirts Henry’s Hoodies must sell to break even.