Question

Suppose you are the owner of a picture frame store and your current fixed costs total $50,000 (real estate taxes, interest on a bank loan, etc.). In addition, your current unit variable cost for a picture is $50 (which includes labor, glass, frame and matting). Calculate the price necessary to break-even by selling a quantity of 1,000 frames.

Answer 1

Break-even is at a price of $100

Step-by-step explanation:

Break even is when the incomes are equal to the outcomes.

In this case, the sales are our incomes and the variable and fixed cost are the outcomes.

So,

Sales =variable cost-fixed cost

Sales=price *x

Variable cost= $50x

Fixed cost=$50,000

units= 1000

price *1000=$50*1000+50000

Price =(50000+50000)/1000

Price =100000/1000

Price =$100