Question

Toby's Tiny Toys have fixed expenses of $53,900 for the production of their tiny toys. Toby's has a variable expense of $12.50 a piece for each toy they produce, and they sell their toys for $16.50 a piece.How many tiny toys do they have to sell to reach their breakeven point?

Answer 1

The total cost of the factory will be the sum of its variable costs and it's fixed costs. The factory has fixed costs of $53,900 and variable costs of $12.50 per unit produced. Let $x$ be the number of toy's produced by this Toby's Tiny Toys, then the total variable costs will be $12.50x$. From this information we can gather that the cost function for this factory is,

$C(x)=53\,900+12.50x.$

On the other hand, if we let $x$ be the number of toys sold, we can gather that at the selling price of 16.50, the revenue function will be ,

$R(x)=16.50x.$

Toby's Tiny Toys will reach their break even point when the total costs are equal to the total revenue. At this break even point ,we have that

$R(x)=C(x)\\\implies 16.50x=12.50x+53\,900\\\implies 16.50x-12.50x=53\,900\\\implies 4x=53\,900\\\implies x=\frac{53\,900}{4} \\\implies x=134\,750.$

The company has to sell 134 750 units to break even.