Patricia owns a bagel shop and she wants to advertise her shop on TV. She decides on a 30-second ad on the Food Network. The ad is supposed to run for 1 month. This ad costs $100,000. Her cost of good sold (COGS) for 1 bagel is $0.75, of which $0.25 comes from advertising. She needs to sell 400,000 bagels in order to break even for the advertising expense.

Question

Quizplus · Accepted Answer

Patricia's advertising cost per bagel is $0.25. To break even for the advertising expense of $100,000, she needs to sell $100,000/$0.25 = 400,000 bagels. Therefore, the statement is true.

Patricia Owns a Bagel Shop and She Wants to Advertise