your monthly expenses will be rent on the mall kiosk $2500 and hourly pay for yo

Question

your monthly expenses will be rent on the mall kiosk $2500 and hourly pay for your four employess. the kiosk will be open 300 hours per month and the hourly cost of an employee including benefits is $15/hour. in addittion, you have hired a business manager who will handle ordering the inventory, maintaining the accounting records, and scheuling employess. the business manager monthly salary is $600 per month. Calculate the viarable and fixed cost and calculate the breakeven point at a sale price of $15.

Explanation / Answer

The cost that does not change due to change in input is called FIXED COST.

Example : Rent, manager salary...

Fixed cost = 2500 + 600 =$3100

~

The cost that depends on the number of units is called VARIABLE COST.

Example : employees wages..

Variable cost =300 hrs * 4 employees * $15 = $18,000

~

Break even point means the firm has NO LOSS/PROFIT.

Break-even= (fixed cost +variable cost) /15

= (18000 + 3100)/15

=1406.67

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