Question

Hardeep is considering the expansion of her picture-framing camera business to include the printing of oversize pictures from CDs. She would need to lease equipment, at a cost of $249 per month. To process the pictures, she estimates that she would have supplies expenses of $7 per picture.

Hardeep estimates that she can sell 60 pictures per month.

(a) What price should she charge to break even?

(b) Compute the break-even point in sales dollars.

The picture frames should be sold for $nothing to break even.

Answer 1

a. at break even point ;

fixed costs = contribution

here,

fixed costs =$249 per month

contribution = (sale price - variable costs)* number of units sold................(let sale price be x).

contribution = (x - 7)*60 units.

at break even point

249 = (x-7)*60

=>249 = 60x - 420

=>60x=669

=>x =$11.15.

so the price to be charged to break even = $11.15.

b. break even point sales in dollars = number of units to be sold to break even* price to break even

=>60*$11.15

=>$669.