Question

Kerry's ice cream shop sells ice cream for $3 per cup. To open, he paid $25,000, and he pays a wholesale price of $1 per cup. How many cups of ice cream does he have to sell to break even?

Answer 1

To break even, Kerry needs to sell 12,500 cups of ice cream.

Step-by-step explanation:

To calculate the number of cups of ice cream Kerry needs to sell to break even, we need to consider his costs and revenue. Kerry's fixed costs include the $25,000 initial investment to open the shop. His variable costs include the wholesale price of $1 per cup. The revenue per cup of ice cream is $3.

The break-even point occurs when the total cost is equal to the total revenue. Let's denote the number of cups of ice cream Kerry needs to sell to break even as x. The total cost is the sum of the fixed cost and the variable cost per cup multiplied by x. The total revenue is the revenue per cup multiplied by x.

Setting the total cost equal to the total revenue, we have:

1. Cost = Revenue
2. $25,000 + $1x = $3x
3. Simplifying the equation, we get $25,000 = $2x
4. Dividing both sides by $2, we find x = $25,000 / $2 = 12,500 cups of ice cream

Therefore, Kerry needs to sell 12,500 cups of ice cream to break even.