Toys R us is considering a new iphone app for managers that calculates break eve

Question

Toys R us is considering a new iphone app for managers that calculates break even points so that MBA students no longer have to memorize the break even formula for their midterm. The app will sell for .99 which will be the only source of income for the app. Toys R us believs it will cost $30,000 to develop the ap and that each time they sell the app they will incur a charge from the app store for $0.10 and other variable costs of $0.25.

1. How many times will Toys r us have to sell the app in order to break even?

2. How many times will Toys r us have to sell the app in order to earn a profit of $20,000?

Toys r us is considering placing an advertisment for their new app for $2000 which they beilve will increase sales by 2,750. ShoulToys r us place the ad? Why or why not?

Please show all work so I can understand.

Explanation / Answer

Profit per item = .99-.10-.25=.64 30000(break even)/.64=46875 items 1) 46875 50000(30000+20000)/64=78125 items for 20000 2)78125 2750*.64=1760. 1760 is less than 2000 cost so... 3)NO

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