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Ray Bond sells handcrafted yard decorations at county fairs. The variable cost to make these is $20 each, and he sells them for $50. The cost to rent a booth at the fair is $150. How many of these must Ray sell to break even?

Ray Bond is trying to find a new supplier that will reduce his variable cost of production to $15 per unit. If he was able to succeed in reducing this cost, what would the break-even point be?

Respuesta :

Answer:

break even units for both the cases will be 5

Step-by-step explanation:

Data provided in the question:

For the case 1

Variable cost = $20 each

Selling cost = $50

Rent for the booth fair = $150

Now,

Let break even units be x

At break even

Total cost = Total revenue

Thus,

$20x + $150 = $50x

or

$50x - $20x = $150

or

$30x = $150

or

x = 5

Case 2

Variable cost = $15 per unit

Thus,

At break even

Total cost = Total revenue

Thus,

$15x + $150 = $50x

or

$50x - $15x = $150

or

$35x = $150

or

x = 4.28 ≈ 5

The break even point will still remain the same.