Blossom Recreation Products sells the Amazing Foam Frisbee for $13. The variable cost per unit is $4; fixed costs are $44,000 per month.

Question

What is the annual breakeven point in units? In sales dollars? (Use your answer of breakeven units to calculate the breakeven point in dollars. Round answers to 0 decimal places, e.g. 5,275.)

The breakeven point_______ Frisbees?
The breakeven sales $________?

Answer 1

Aundria,

 

You need to determine when the Revenue equals the cost.  So how many dollars will the frisbee generate if it sells for $13 each?  R = $13 * x, or 13x, with x being the number of frisbees sold...

 

Next determine what the cost to make these frisbees is.  Well, the problem says the cost per unit is $4 PLUS the fixed costs of $44,000.  So we can write C = $4x + $44,000, or 4x + 44000.  

 

So now when problems as you for the breakeven point they are asking, what does x have to equal for the revenue and cost to be the same.  This means we have to set both equations equal to each other, then solve for x.  Soooooooo,

 

Revenue = Cost, or R = C, or more importantly, 13x = 4x + 44,000, where you need to solve for x, and x represents the number of units that need to be sold in order for both sides of the equation to be equal to each other.