Question

4. Break-Even Analysis

A business spends $ 10,000 to produce a new board game. Each
game costs $1.50 to produce and is sold for $9.99
How many games must be sold before the business breaks even?
(5 pts )

Answer 1

x = 1178 games

Explanation:

Let the number of games = x

Let the total cost = Tc

Let the total revenue = Tr

Given the following data;

Investment = $10,000

Cost of each game = $1.50

Selling cost = $9.99

Total cost, Tc = (Cost of each game * Number of games) + Investment

Tc = 1.50x + 10000

Total revenue, Tr = Selling cost * Number of games

Tr = 9.99x

Breakeven point is when total cost is equal to total revenue;

Tc = Tr

`1.50x + 10000 = 9.99x`

`9.99x - 1.50x = 10000`

`8.49x = 10000`

`x = \frac {10000}{8.49}`

x = 1177.86 ≈ 1178 games.

Therefore, the number of games that must be sold before the business breaks even is 1178 games.