Question

Mr. Rios decided to make a business in his class by selling AP review books for all AP students. His fixed cost to begin the business is $500. The sales price for each book is $5. The extra labor and material costs per unit will be $1.25. How many books does he need to sell to break even?

Answer 1

134 books

Step-by-step explanation:

The formula used to calculate the break even point in units is:

break even point = total fixed costs / contribution margin

• total fixed costs = $500
• contribution margin = selling price - variable costs = $5 - $1.25 = $3.75

break even point = $500 / $3.75 = 133.3 books ≈ 134 books

Answer 2

134 books

Step-by-step explanation:

The breakeven point is the number of units to be sold that will make the total sales equivalent with the total cost, such that the company neither makes a profit nor a loss.

Let the number of units sold to break even be c

5c = 1.25c + 500

5c - 1.25c = 500

3.75c = 500

c = 500/3.75

c = 133.33

≈ 134 books