Answer:
a. The profit equation (P) = $10x - $1,000
b. The profit if they make 600 items is $5,000
c. Break-even point in units: 100 units
Break-even point in sales: $3,000
Explanation:
The company has a one-time start up fee of $1,000. This is the fixed cost.
The company makes x items that cost $20 each to make and sells the items for $30 each.
The profit equation (P) = Sales - Total variable costs - Fixed costs = $30x - $20x - $1,000 = $10x - $1,000
If the company makes 600 items,
The profit = $10 x 600 - $1,000 = $5,000
The break-even point is calculated by using following formula:
Break-even point in units = Fixed cost/(Selling price per unit-Variable cost per unit) = $1,000/($30 - $20) = 100 units
Break-even point in sales = 100 x $30 = $3,000
