Use the following information to answer the questions.
A friend of yours is trying to determine whether to open a sandwich stand at the local mall based on the following data. She expects total fixed costs per year of $24,000, a sale price per sandwich of $3.00, and variable costs per sandwich of $1.80.
The break-even level of output for this endeavor is:
What percentage of every sales dollar will contribute to covering fixed costs?
The break-even point in sales dollars is:
If your friend expects to sell no more than 15,000 sandwiches per year, then:
(A) she should not undertake the endeavor given the current cost/volume/profit expectations.
(B) she should undertake the endeavor given the current cost/volume/profit expectations.
(C) she should assess the effect of lowering the sales price of sandwiches if she wishes to pursue this endeavor.
(D) None of the above.
Suppose x sandwich is sold. The sales price per sandwich is $3.00. So the revenue is R = 3x. The cost per sandwich is $1.8 and the fixed cost per year is $24,000, then the total cost is C = 1.8x + ...
This provides an example of finding break-even point and fixed costs.