Question

For Cairo Dream House, a company that manufactures doors, the combined cost for labor and material is $50 per door. Fixed costs (costs incurred in a given period, regardless of output) are $10,000. If the selling price of a door is $15, how many must be sold for the company to earn a profit?

Answer 1

Cairo Dream House needs to sell 286 doors to earn a profit.

Step-by-step explanation:

To calculate the number of doors that Cairo Dream House needs to sell in order to earn a profit, we need to consider the costs and revenue involved. The fixed costs of $10,000 need to be covered, along with the variable costs of labor and material, which is $50 per door. Since the selling price of a door is $15, we can determine the profit per door by subtracting the variable cost from the selling price: $15 - $50 = -$35.

Since the profit per door is negative, Cairo Dream House will not earn a profit for each door sold. Therefore, the company needs to sell enough doors to cover its fixed costs of $10,000. We can calculate the number of doors by dividing the fixed costs by the loss per door:

$10,000 / -$35 ≈ 285.71

Rounded up to the nearest whole number, Cairo Dream House needs to sell 286 doors to earn a profit.