Question

Elana owns a consulting business that helps software companies market their services to school districts. She earns an average of $5687.1 for every contract one of her client companies signs with her help. In order to be able to run her business, she needs to cover $7,000/month (rent, licenses, etc.). The average costs associated with each contract are $1260.7. How many contracts must she facilitate each month in order to break even

Answer 1

Answer:

2 contracts

Step-by-step explanation:

Break even point refers to the number of units or sales that needs to be generated for the company to make neither a profit nor a loss.

This means that at the break even point, sales is equivalent to the cost incurred (both fixed and variable).

Let the number of contracts that must be signed to break even be s

The rent is a fixed cost while the cost associated with each contract is variable.

5687.1s = 7000 + 1260.7s

5687.1s - 1260.7s = 7000

4426.4 s = 7000

s = 1.58

≈ 2

She must facilitate 2 contracts each month to break even.