Question

A bicycle store costs $2450 per month to operate. The store pays an average of $75 per bike. The average selling price of each bicycle is $145. How many

bicycles must the store sell each month to break even?
The store must sell bicycles each month to break even

Answer 1

35

Explanation:

Breakeven quantity are the number of units produced and sold at which net income is zero

Breakeven quantity = fixed cost / price – variable cost per unit

Fixed costs are costs that do not vary with output. e,g, rent, mortgage payments

If production is zero or if production is a million, Mortgage payments do not change - it remains the same no matter the level of output.

Hourly wage costs and payments for production inputs are variable costs

Variable costs are costs that vary with production

fixed cost = $2450

Variable cost = $75

price = $145

(2450) / (145 - 75) = 35