Barb and Cheryl are college students. They are trying to decide what to do over the next summer. Barb's mother has suggested that they both come and work at her plastics manufacturing company where each will earn $5,250 over the summer. Cheryl's mother, who runs the local farmer's market, suggests that they go to a local resort area and sell fresh fruit and vegetables to tourists. Their markup on the produce would be one-third, so each $1.00 of revenue would involve a variable cost of $0.75. In addition to purchasing the produce, they would have to rent a location. The cost to rent a small roadside stand for the summer is $2,500.
(i) How many dollars worth of produce will they have to sell in order to break even in an accounting sense?
(ii) How many dollars worth of produce will they have to sell in order to break even in an economic sense?

Question

Quizplus · Accepted Answer

The Answer of Barb and Cheryl are college students. They are trying to decide what to do over the next summer. Barb's mother has suggested that they both come and work at her plastics manufacturing company where each will earn $5,250 over the summer. Cheryl's mother, who runs the local farmer's market, suggests that they go to a local resort area and sell fresh fruit and vegetables to tourists. Their markup on the produce would be one-third, so each $1.00 of revenue would involve a variable cost of $0.75. In addition to purchasing the produce, they would have to rent a location. The cost to rent a small roadside stand for the summer is $2,500.
(i) How many dollars worth of produce will they have to sell in order to break even in an accounting sense?
(ii) How many dollars worth of produce will they have to sell in order to break even in an economic sense?

Barb and Cheryl Are College Students