Question

A firm is considering adding a second secretary to answer phone calls and make appointments. The cost of the secretary will be $10/hour and she will work 200 hours each month. If each new client adds $400 of profit to the firm, how many clients must the secretary arrange for the firm to break even?

Answer 1

Solution and Explanation:

The following method will be used

The total cost of the firm = 10 multiply with 200 = $2,000

The Profit per client = $400

Let x be the no of clients required for break even. At break-even point,

The total profit = The total cost

400x = 2,000, The value of x is to be calculated

We get, x = 2,000 divided by 400 = 5 clients

Hence, secretary should arrange 5 clients to break even.