Question

Rachelle is the owner of a full-service car wash. For the month of December she 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 Rachelle need to sell to break-even each month?

Answer 1

Total Fixed costs: $

Rent 2,000

Utilities 700

Salaries 2,950

Advertising 50

Total fixed cost 5,700

Contribution per car = Selling price - Unit variable cost

= $10.50 - $2.50

= $8.00 per car

Break-even point in full-service car

= Total fixed cost

Contribution per car

= $5,700

$8.00

= 712.5 = 713 cars

Step-by-step explanation:

Break-even point in full-service car equals total fixed cost divided by contribution per car. Contribution per car is selling price minus variable cost per car.