Question

Break-Even Analysis The Parents for Better Schools of Fresno, California, collected recipes from members and published a cookbook entitled Food for Everyone. The book will sell for $20 per copy. The chairwoman of the cookbook development committee estimated that the club needed to sell 800 books to break even on its $3,600 investment. What is the variable cost per unit assumed in the Parents for Better Schools’ analysis? Round your answer to the nearest cent. $ per unit

Answer 1

Answer:

The variable cost per unit is $15.6

Explanation:

In this question, we are asked to calculate the variable cost per unit assumed in the Parents for better schools analysis

Mathematically, the Breakeven point can be calculated through the following formula:

Breakeven point = Fixed Cost/( Selling price per unit - Variable cost per unit)

From the question, we can identify the following;

The selling price per unit is $20

The Breakeven point = 800 books

Fixed cost = Amount invested = $3,600

Substituting these in the above written formula;

800 = 3,600/(20 - VC)

0.2222 = 1/(20-VC)

0.222(20-VC) = 1

4.44 - 0.22VC = 1

3.44 = 0.22VC

VC = 3.44/0.22 = 15.64

This is $15.6 to the nearest cent dollar per unit