Everything Donut plans to sell donuts at a local farmer's market.The permit and space rental will cost her $2,000 for the June through August season.The donuts will sell for $7.00 per dozen.Ingredients and overhead average $4.00 per dozen.They also have to pay 5% of her gross sales to the markets' organizers.How many dozens of donuts will she need to sell to cover her fixed costs?
A)755 dozen with a very small profit on the last dozen.
B)667 dozen with a very small profit on the last dozen.
C)301 dozen
D)They can never break even.

Question

Quizplus · Accepted Answer

To cover her fixed costs, Everything Donut needs to calculate the total cost per dozen, including the variable cost of ingredients and overhead ($4.00), plus the 5% of gross sales ($0.35 per dozen, since 5% of $7.00 is $0.35), making the total cost per dozen $4.35. The profit per dozen is $7.00 - $4.35 = $2.65. To cover the fixed costs of $2,000, divide $2,000 by $2.65, which equals approximately 754.7 dozen. Therefore, she needs to sell 755 dozen to cover her fixed costs, with a very small profit on the last dozen.

Everything Donut Plans to Sell Donuts at a Local Farmer's