Question

11.2 It costs a man $120.00 dollars to buy the things that he needs to make hotdogs. The city allows him to sell his hotdogs somewhere near the city hall. However, the city charges him 50 49 dollars for each hotdog sold. Calculate his break-even point, if the price he charges for 1 hotdog is $2.99.

Answer 1

Let breakeven quantity of hot dogs is x hot dogs

Cost to make hot dogs = $120

Tax paid = $0.49 per hot dog

Tax paid on x hot dogs = tax paid * break even quantity of hot dogs = $0.49 * x = $0.49x

Total cost of break even quantity = Cost to make hotdogs + Tax paid on breakeven quantity of hotgogs

Total cost of break even quantity = $120 + $0.49x

Total revenue from break even quantity of hotdogs = Break even quantity * Price = x * $2.99 = $2.99x

At break even,

Total revenue = Total cost

$2.99x = $120 + $0.49x

$2.99x - $0.49x = $120

$2.50x = $120

x = $120/$2.50

x = 48

The break even point or quantity is 48 hotdogs.