Question

Royal Sweets sells one dozen milk fritters in thick syrup for $3.50. Its total fixed cost are $15,000 and its per dozen variable cost are $2.00. Calculate the break even point in dozens (units).

Answer 1

Answer: Sweets needs to sell to cover its fixed and variable costs.

Let x be the number of dozens of milk fritters that Royal Sweets needs to sell to break even.

Revenue from selling x dozens of milk fritters = price per dozen x number of dozens sold = $3.50x

Total cost = fixed cost + variable cost

Total cost = $15,000 + ($2.00 x)

At break-even point, revenue = total cost, so:

$3.50x = $15,000 + ($2.00 x)

$1.50x = $15,000

x = 10,000/1.5

x = 6,666.67

Therefore, Royal Sweets needs to sell approximately 6,667 dozens of milk fritters to break even.