Question

A division of a company produces income tax apps for smartphones. each income tax app sells for $9. the monthly fixed costs incurred by the division are $25,000, and the variable cost of producing each income tax app is $4. (a) find the break-even point for the division.

Answer 1

The equation for profit is income – cost:

Profit = Income – Cost

Let us say that x is the number of sold amount

Profit = 9 x – (25,000 + 4 x)

Profit = 5 x – 25,000

Breakeven point occurs when Profit = 0, hence:

5 x = 25,000

x = 5,000

The breakeven is when 5,000 people uses the income tax app