Financial lit help please!

Question

Wally runs a gardening business. He sells vegetable seedlings to his customers. He buys the seeds at the wholesaler for $10 a pack of 1000. He grows the seedlings in cardboard containers that he buys for $0.09 each. He pays $40 per month for water and $10 per month for electricity. He rents an empty greenhouse in his grandparents back yard for $10 per month. He also buys potting soil at $30 per 50 kg. 50 kg of potting soil can fill 100 containers. He sells his vegetable seedlings at $1.00 each. a) List all of Wally’s fixed costs.  

 

b) List Wally’s variable costs. 

 

c) Calculate Wally’s breakeven point.

Answer 1

Anthony,

 

The fixed costs are

 

Water       : $40/month

Electricity  : $10/month

Rent         : $10/month

Total = $60/month

 

Variable costs are

 

Seeds: $10/1000 or $1/100 seedlings

Container: $0.09 each or $9/100 seedlings

Potting soil : $30/100 containers or $30/100 seedlings

 

Breakeven point will be when Amount from number of seedlings sold is same as sum of fixed and variable costs

 

  60 + .01x + .09x + .3x = 1x

60 + .4x = x

x = 60/.6 = 100

 

Breakeven point is 100 seedlings sold.