Question

Using the equation method, calculate how many bikes Mike needs to sell to break even with the following information. Selling Price=$150. Variable costs per bike=$75. Fixed costs=$7,500.

a) 100 bikes
b) 50 bikes
c) We don't have enough information to calculate the break-even point.
d) None of the above

Answer 1

Using the equation method for break-even analysis, the calculation shows that Mike needs to sell 100 bikes to break even. The fixed costs, variable costs, and selling price per bike are used in the calculation to determine this number.

Step-by-step explanation:

To calculate the number of bikes Mike needs to sell to break even, we use the equation method for break-even analysis. The break-even point is reached when total revenue equals total costs (both fixed and variable costs). We can set up the break-even calculation as follows:

Total Revenue = Total Costs

(Selling Price per Bike) x (Number of Bikes) = (Variable Cost per Bike x Number of Bikes) + Fixed Costs

$150 x = $75 x + $7,500

From here, we can solve for x (the number of bikes) to find the break-even point:

$150x - $75x = $7,500

$75x = $7,500

x = $7,500 / $75
x = 100 bikes

Thus, Mike needs to sell 100 bikes to break even. The correct answer is (a) 100 bikes.