Barry Carter is considering opening a used-book store. He wants to estimate the number of books he must sell to break even. The books will be sold for $ 13.96 each, variable operating costs are $ 10.06 per book, and annual fixed operating costs are $ 72 comma 600. a. Find the operating breakeven point in number of books. b. Calculate the total operating costs at the breakeven volume found in part (a). c. If Barry estimates that at a minimum he can sell 2 comma 040 books per month, should he go into the business

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stokholm stokholm · Answer 1 · 2019-08-09T09:43:25+02:00

Answer:

a. Operating Break even Point = 18,616 units

b. Operating costs at break even = $259,877

c. If he sells 2,040 only then there will be loss as break even point is much higher therefore, he should not sell at this level.

Explanation:

Provided

Selling Price per unit = $13.96

Variable Cost per unit = $10.06

Contribution Per Unit = $13.96 - $10.06 = $3.90

Fixed Cost = $72,600

a. Operating Break even Point = [tex]\frac{Fixed \:Cost}{Contribution \: Per \: Unit}[/tex] = [tex]\frac{72,600}{3.90} = 18,615.38[/tex]

Since units can not be in fraction therefore Break Even Units = 18,616

b. Operating costs at break even = Variable + Fixed

Variable = $10.06 [tex]\times[/tex] 18,616 = $187,276.96 i.e = $187,277

Fixed = $72,600

Total Operating Cost = $187,277 + $72,600 = $259,877

c. If he sells 2,040 only then there will be loss as break even point is much higher therefore, he should not sell at this level.