Question

Tommy is selling lemonade for $0.3 and expects to have labor costs of $0.05 per cup and material expense of $0.05 per cup. Along comes Mom and charges him rent for the street corner of $20. Approximately how many cups of Lemonade does he need to sell to break even?

(please round up your answer as a whole number, for example 210)

Answer 1

Tommy needs to sell approximately 100 cups of lemonade at $0.30 each to cover his variable costs of $0.10 per cup and the $20 fixed rent cost, thus breaking even.

Step-by-step explanation:

To calculate how many cups of lemonade Tommy needs to sell to break even, we must consider both his variable costs per cup and the fixed cost of the rent. The variable cost per cup is given as the sum of labor cost ($0.05) and material expense ($0.05), which equals $0.10. The selling price per cup is $0.30. To cover the fixed rent cost of $20, we'll use the formula:

Number of Cups = Fixed Cost / (Selling Price - Variable Cost per Cup)

Number of Cups = $20 / ($0.30 - $0.10) = $20 / $0.20 = 100 cups

Since we have to round up to the nearest whole number, Tommy needs to sell approximately 100 cups to break even.