You run a small auto service shop.Your fixed expenses per week are $1,000 and your average customer invoice is $500 with an associated marginal cost of $300.What is your weekly break-even quantity?

Question

Quizplus · Accepted Answer

To find the break-even quantity, we can use the formula:
Break-even quantity = Fixed expenses / (Average customer invoice - Marginal cost)
Plugging in our values, we get:
Break-even quantity = 1000 / (500 - 300)
Break-even quantity = 1000 / 200
Break-even quantity = 5 cars

Therefore, the best choice is C) 5 cars, as this is the minimum number of cars the shop needs to service per week to break even.

You Run a Small Auto Service Shop