Question

Max sells hot dogs at the college world series for only 1.50 each. It costs him 75 to rent the cooker. His rent is variable based on sales and is 0.50 per hot dog. His cost for the supplies for hot dogs he sells is 0.50. How many hot dogs does Max have to sell to break even?

Answer 1

Max must sell at least 150 hot dogs to break even, considering his fixed cost for renting the cooker and the variable costs for each hot dog sold.

Step-by-step explanation:

Max needs to calculate his break-even point to determine how many hot dogs he must sell to cover all of his costs. To do this, we must consider both his fixed and variable costs. Max has a fixed cost of $75 for renting the cooker. Each hot dog he sells has a variable cost of $1.00 ($0.50 for rent based on sales and $0.50 for the supplies for the hot dogs). As Max sells each hot dog for $1.50, we can determine the break-even point through the following steps:

• Calculate the contribution margin per hot dog: This is the selling price per hot dog minus the variable cost per hot dog, which is $1.50 - $1.00 = $0.50.
• Calculate the break-even point in units: This is the fixed cost divided by the contribution margin per hot dog, which is $75 / $0.50 = 150 hot dogs.

Therefore, Max needs to sell at least 150 hot dogs to break even.