Can somebody solve the problem below: If you own a business that prints menus fo
ID: 2803029 • Letter: C
Question
Can somebody solve the problem below:
If you own a business that prints menus for restaurants and you want to determine the number of menus you must sell in order to break even. The average price you charge for each menu is $1.00. Your fixed costs are $1,000 per year and your unit variable cost is 50 cents. Please respond to each of the below questions and show your work.
What quantity must you sell to break even.
At the break-even point, what is your profit?
What would your profit be if you sold 50 units more than the break-even quantity?
Explanation / Answer
a) Contribution margin = Selling price - Variable cost= $1-0.50 = $0.50
Fixed costs = $1000
Breakeven quantity = Fixed costs/Contribution margin per unit
= $1000/0.50 = 2000 units
b) At breakeven point, the profit will be 0 as it is the quantity a which the compnay has just receivered its fixed costs and makes profit from additional units sold over and above the BEP
c) If 50 units more than BEP are sold, the profit will be units sold * COntribution margin per unit = 50*0.50 = $25