Question

You want to invest in a hot dog stand near the ballpark. The hot dog stand will have $60,000 in fixed cost. Each hot dog costs you $3.5. You sell each hot dog for $6.5. Your break-even quantity is _________, and you need to sell __________ hot dogs to make $30,000 in profit.

a. 20,000; 30,000

b. 10,000; 10,000

c. 30,000; 20,000

d. 10,000; 30,000

e. 20,000; 10,000

Answer 1

The break-even quantity for the hot dog stand is 20,000 hot dogs, and to make a $30,000 profit, the owner would need to sell an additional 10,000 hot dogs, totaling 30,000 hot dogs.

Step-by-step explanation:

To calculate the break-even quantity, we need to determine how many hot dogs need to be sold to cover the fixed costs. The calculation is done by finding the difference between the selling price and the cost price (also known as the contribution margin per unit), and then dividing the fixed costs by this margin. In this case, the contribution margin per unit is calculated as: