Question

The Junior League of Yadkinville, California, collected recipes from members and published a cookbook entitled Food for Everyone. The book will sell for $18 per copy. The chairwoman of the cookbook development committee estimated that the club needed to sell 2,000 books to break even on its $4,000 investment.

What is the variable cost per unit assumed in the Junior League's analysis?

_____________ per unit

Answer 1

Each book sells for $18 per copy

So, 2000 books will raise a ttoal revenue of 18*2000 = $36,000

Now, initial investment was $4000

Let the variable cost per copy be 'x'.

So, for 2000 copies, the variable cost = $2000x

Total cost = (2000x + 4000) dollars

Total revenue = 36000 dollars

For breakeven, cost = revenue

2000x + 4000 = 36000
2000x = 32000
x = 16

So, the variable cost per unit is : $16