The owner of a small restaurant that sells take-out fried chicken and biscuits pays $2,500 in rent each month,$500 in utilities,$750 interest on his loan,insurance premium of $200,and advertising on local buses $250 a month.A bucket of take-out chicken is priced at $9.50.Unit variable costs for the bucket of chicken are $5.50.How many small buckets of chicken does the restaurant need to sell to break even?
A)988 buckets
B)1,000 buckets
C)1,050 buckets
D)3,150 buckets

Question

Quizplus · Accepted Answer

To break even, the total revenue needs to cover all the fixed costs and variable costs.

Total fixed costs = rent + utilities + interest + insurance + advertising = $2500 + $500 + $750 + $200 + $250 = $4,200

The contribution margin per unit (the amount that goes towards covering the fixed costs) = Price per unit - Variable cost per unit = $9.50 - $5.50 = $4.

So the number of units needed to break even = Total fixed costs / Contribution margin per unit = $4200 / $4 = 1050.

Therefore, the restaurant needs to sell 1,050 small buckets of chicken to break even.

The Owner of a Small Restaurant That Sells Take-Out Fried