Question

You want to invest in a hot dog stand near the ballpark. The hot dog stand will have $60,000 in fixed cost. Each hot dog costs you $3.5. You sell each hot dog for $6.5. Your break-even quantity is _________ and you need to sell __________ hot dogs to make 30,000 in profit.

Answer 1

Answer:

Break-even quantity is 20,000 hot dog

and,

to make profit of $30,000 , the number of hot dog sold should be 30,000

Explanation:

Given:

Fixed cost = $60,000

Cost of each hot dog = $3.5

Selling cost = $6.5

Now,

let the quantity at breakeven be 'x'

At breakeven point,

Total cost = Total revenue

Thus,

$60,000 + $3.5x  = $6.5x

or

$6.5x - $3.5x = $60,000

or

$3x = $60,000

or

x = 20,000

To earn profit of $30,000

Now,

Profit = Revenue - Cost

Let the quantity for $30,000 profit be 'y'

Thus,

$30,000 = $6.5y - ($60,000 + $3.5y)

or

$30,000 = $6.5y - $3.5y - $60,000

or

$90,000 = $3y

or

y = 30,000

Hence,

Break-even quantity is 20,000 hot dog

and,

to make profit of $30,000 , the number of hot dog sold should be 30,000