Question

A manufacturer produces mugs at a cost of $2 daily. The company also has daily costs of $500. It then sells the mugs for $5. What is the break-

even point? (The number of mugs it has to sell to
cover all daily costs)​

Answer 1

It has to sell 100 mugs.

Step-by-step explanation:

Remember that profit (P), Revenue (R), and cost (C) are related by the following formula:

`P=R-C`

The term break- even point occurs when the Revenue is equal to the Cost, making the profit to be equal zero. In other words:

`0=R-C \\ \\ R=C`

A manufacturer produces mugs at a cost of $2 daily. The company also has daily costs of $500. So each day the cost for the company is:

`C=500`

So the number of mugs the company produces every day is:

`No. \ mugs=(\$500)/(\$2)=250`

We also know that the company sells the mugs for $5, so the revenue is:

`R=5x \\ \\ \\ x:\text{Number of mugs it has to sell tocover all daily costs}`

Then by equating equations:

`5x=500 \\ \\ Isolating \ x: \\ \\ x=(500)/(5) \\ \\ x=100`

So the company has to sell 100 out of 250 mugs it produces daily in order to cover all daily costs.