You have decided to start a vending machine business. A local store has space available for your machine but wants to charge you an annual fee to use the space. You estimate that you can sell 5,000 cans of soda each year. You sell a can of soda for $1.25, which allows you a profit of $0.50 per can. What is the most you would spend to lease the space for one year?
A) $1,000.
B) $2,500.
C) $5,000.
D) $7,500.
E) $10,000.

Question

Quizplus · Accepted Answer

To calculate the most you would spend to lease the space, you must subtract your total annual costs from your total annual revenue. Your total annual revenue would be:
$1.25 x 5,000 = $6,250
Your total annual cost would be:
$0.75 x 5,000 = $3,750 (the cost of the soda itself)
+ Annual fee for leasing the space
Let x be the amount of the annual fee. Then your total annual cost is:
$3,750 + x
To find the most you would spend on leasing the space, you want to find the value of x that makes your total annual revenue equal to your total annual cost. So you set up the equation:
$6,250 = $3,750 + x
Solving for x gives:
x = $2,500
Therefore, the most you would spend to lease the space for one year is $2,500, which is option B.

You Have Decided to Start a Vending Machine Business