Question

Eric sells model cars from a booth at a local flea market. He purchases each model car from a distributor for $14 and the flea market charges him a booth fee of $30. Eric sells each model car for $20. How many cars will Eric have to sell to break even?

Answer 1

Answer: 5 cars

Explanation:

Breakeven point = Fixed Cost/ Contribution margin

Fixed cost is $30 which is the flea market booth charge

Contribution margin is sales price less variable cost.

The Variable Cost is the amount he is charged by the distributor of $14.

Contribution Margin = 20 - 14

= $6

Breakeven point = 30/6

= 5 cars