Hedge Fun is a landscaping firm that specializes in topiary.It contracts with the owners of 125 local homes and provides its service at an annual fee of $1,300.Its average variable cost is $800,and its annual fixed cost is $28,000.What is the break-even level of output?

Question

Quizplus · Accepted Answer

The break-even level of output is where the total revenue equals total cost, or where the profit is zero. 
Total revenue = price x quantity
Price = $1,300 
Variable cost per unit = $800 
Fixed cost = $28,000 
For break-even, 
$1,300q = $800q + $28,000 
$500q = $28,000 
q = 56 
Therefore, the break-even level of output is 56.

Hedge Fun Is a Landscaping Firm That Specializes in Topiary