Question

Philip Neilson owns a fireworks store. Philip's fixed costs are $12,000 a month, and each fireworks assortment he sells costs, on average, $8. The average selling price for an assortment is $25

() What is the break-even point for Philips fireworks store?

Answer 1

The break-even point for Philip Neilson's fireworks store is 706 assortments per month, calculated by dividing the fixed costs by the difference between selling price per unit and variable cost per unit.

Step-by-step explanation:

The student is asking about calculating the break-even point for Philip Neilson's fireworks store. the break-even point is the number of units that must be sold to cover both fixed and variable costs, resulting in a profit of $0. to find this point we need to use the formula:

Break-Even Point (Units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

In Philip's case his fixed costs are $12,000 a month. The variable cost per unit is $8 and the selling price per unit is $25. Let's plug these values into the formula:

Break-Even Point (Units) = $12,000 / ($25 - $8) = $12,000 / $17 = 705.88 units

Since we can't sell a fraction of a unit, Philip will need to sell 706 assortments to break even each month.