# Breakeven

1. Which of the following is the correct model for total revenue, TR?

A) p(2500 - 12p) = TR

B) 2500p -12p = TR

C) d(2500 -12p) = TR

D) 2500 - (12p)d = TR

2. Westside Bakery is considering opening a new branch in Abingdon, IL. Westside will initially sell only loaves of wheat bread. The fixed costs including building, ovens, and displays total $60,000. The variable cost for each loaf of bread is $.50. Westside figures to sell loaves of wheat bread for $2 each.

What is the breakeven point?

Assume that Westside estimates the demand to be 6000 loaves per month. What profit or loss is anticipated with this level of demand for the year? (Simply use 12 months to calculate the year's demand and do not include units).

Selling 5000 loaves per month, what is the minimum price per loaf that Westside must charge in order to breakeven for the year?

At a price of $2.50, what is the anticipated profit for the year, given a demand of 6000 loaves per month?

3. Bob buys a new machine that produces widgets. With this machine, only 2% of widgets produced are defective. We randomly select two widgets that have been produced by the machine.

How many experimental outcomes yield 2 defects?

What is the P(no defects)?

What is the P(one defect)?

What is the P(two defects)? (Do not round for this problem)

Say we chose three widgets instead of two widgets, how many experimental outcomes would produce exactly one defect?

#### Solution Preview

Problem 1

Total Revenue = Price * Quantity.

Out of the four possible answers only A has a price component (p) multiplied by a quantity component (2500 - 12p).

Answer: A

Problem 2

Breakeven ...

#### Solution Summary

This solution analyzes the breakeven price, production for a bakery.