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    Setting up a business

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    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:

    (A) 12,000.
    (B) 16,000.
    (C) 20,000.
    (D) 24,000.

    What percentage of every sales dollar will contribute to covering fixed costs?
    (A) 30%
    (B) 40%
    (C) 50%
    (D) 60%

    The break-even point in sales dollars is:

    (A) $60,000.
    (B) $54,000.
    (C) $46,000.
    (D) $30,000.

    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.

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    https://brainmass.com/business/business-math/setting-up-a-business-208859

    Solution Preview

    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 + ...

    Solution Summary

    This provides an example of finding break-even point and fixed costs.

    $2.19

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