Question

Rebotar Inc. makes basketballs. Their fixed costs are $3,450. Variable costs are $12 per basketball. If the basketball is priced at $25 and 300 basketballs are sold, did Rebotar break even? How do you know? Show all work​

Answer 1

Given:

Fixed cost = $3,450

Variable cost = $12 per basketball

Selling price = $25 per basketball

Number of basketball sold = 300

To find:

Whether Rebotar did break even.

Solution:

According to the question,

Cost of 1 basketball = $12

Cost of 300 basketball = $12×300

We know that,

Total cost = Fixed cost + Variable cost

`TC=3450+12(300)`

`TC=3450+3600`

`TC=7050`

So, the total cost is $7050.

Now,

Selling price of a basketball = $25

Selling price of 300 basketball = $25×300

Total revenue is

`TR=25* 300`

`TR=7500`

So, total revenue is $7500.

At break even situation the profit is zero. In other words, the total revenue is equal to total cost.

Since,
`TC\\eq TR`, therefore, Rebotar did not break even.