Question

Greg is the owner of a full-service car wash. For the month of December he paid $2,000 in rent, $700 in utilities, $2,950 in salaries, and $50 on advertising. A full service car wash costs $10.50. Unit variable costs per car wash are $2.50. How many full-service car washes does Greg need to sell to break-even each month

Answer 1

Answer:

Break-even point= 713 car washes

Explanation:

Giving the following information:

For December he paid $2,000 in rent, $700 in utilities, $2,950 in salaries, and $50 on advertising. A full-service car wash costs $10.50. Unit variable costs per car wash are $2.50.

First, we need to calculate the total fixed costs:

Fixed costs= rent + utilities + salaries + advertising

Fixed costs= 2,000 + 700 + 2,950 + 50= $5,700

Now, using the following formula, we can calculate the break-even point in units:

Break-even point= fixed costs/ contribution margin

Break-even point= 5,700/ (10.5 - 2.5)= 713 car washes