Question

The night owl restaurant expects to sell 6,000 meals during the upcoming month with an average variable cost per meal sold of $6. if total fixed costs are expected to be $24,000, what would the average selling price per meal sold be at the breakeven point?
a. $6
b. $8
c. $10
d. $12

Answer 1

The breakeven point is that when the total revenue is equal to the total cost of production. If we let x be the average selling price, the total revenue would be,
   
    6000x

Given the conditions above, the total cost would be,
  
    (6000)(6) + 24000

At breakeven,

   TR = TC

Substituting,

     6000x = (6000)(6) + 24000

The value of x from the equation is 10

Answer: $10