Question

(a) An enterprising college student has decided to purchase a local car was business. The purchase cost is $150,000. Car washes will be priced at $5.50 and variable cost per car (soap, water, labor etc.) is expected to equal $1.50. How many cars must be

washed in order to recover the $150,000 purchase price? (b) A publisher has a fixed cost of $250,000 associated with the production of a college mathematics book. The contribution to profit and fixed cost from the sale of each book is $6.25.

i) Determine the number of books which must be sold in order to break even.
ii) What is the expected profit if 50,000 books are sold?​

Answer 1

Question 1) :- An enterprising college student has decided to purchase a local car was business. The purchase cost is $150,000. Car washes will be priced at $5.50 and variable cost per car (soap, water, labor etc.) is expected to equal $1.50. How many cars must be washed in order to recover the $150,000 purchase price ?

Answer :-

→ Total purchase cost = $150,000 .

and,

→ Car washes price = sales price per car = $5.50

also,

→ variable cost per car = $1.50

so,

→ margin per car = $5.50 - $1.50 = $4

then,

→ Total cars must be washed in order to recover purchased price = Total purchase cost / margin per car = 150000/4 = 37500 cars .

Question 2) :- A publisher has a fixed cost of $250,000 associated with the production of a college mathematics book. The contribution to profit and fixed cost from the sale of each book is $6.25.

i) Determine the number of books which must be sold in order to break even.

ii) What is the expected profit if 50,000 books are sold ?

Answer :-

→ Number of books he must sold in order to break even = Fixed cost / sale of each book = 250000/6.25 = 40000 copies .

and,

→ Profit if he sales 50000 copies = in 40000 copies he gets fixed cost + in 10000 copies he gets profit = 10000 * 6.25 = $62500 .

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