Scenario 13-2. Benjamin has been running his kennel service for one year. So far, business has been good and all expenses have been met each month, leaving a small profit. He has a large building capable of handling a total of 35 dogs. Each pen has fresh water supplied through pipes, an automated feeder, and a heating/cooling unit that keeps each pen at a comfortable 68 degrees. Benjamin rents each pen at a price of $30 per day. His total fixed costs each month are $500. Average variable costs are $12.
-In Scenario 13-2, based on the numbers above, what is Benjamin's breakeven point?

Question

Quizplus · Accepted Answer

To calculate the breakeven point, we use the formula: Breakeven Point in Units = Fixed Costs / (Price per Unit - Variable Cost per Unit). Here, Fixed Costs = $500, Price per Unit = $30, and Variable Cost per Unit = $12. So, Breakeven Point = $500 / ($30 - $12) = $500 / $18 = 27.78. Since you can't rent a fraction of a pen, rounding up to the nearest whole number gives 28 pen rentals each month to break even.