Question

Greg Winston has gone bankrupt and started a lemonade stand. He has invested $400 in lemonade equipment, and he sells a glass of lemonade for $4. His unit cost of producing a cup of lemonade is $2.50. How many glasses of lemonade must Greg sell to generate a profit of $300?

Answer 1

Answer:

See below

Explanation:

We will apply the formula below to compute the above given information.

= (Fixed cost + Desired profit) / Contribution margin

Given that;

Fixed cost = $400

Desired profit = $300

Contribution margin = Unit selling price - Unit variable cost = $4 - $2.5 = $1.5

Therefore,

= ($400 + $300) / $1.5

= $700 / $1.5

= 466.67

Therefore, Greg must sell 466.67 units of lemonade glasses to generate a profit of $300