CDz, a local music and video retailer, spends $250 a month in advertising and inventory management. The business buys videos at a cost of $6.00 per unit and then sells each unit for $16.00. To break even in any one month, how many units would CDz have to sell?

Question

Quizplus · Accepted Answer

The break-even point is reached when the total revenue equals the total costs. The fixed costs are $250 per month. The cost per unit is $6, and each unit is sold for $16, making a profit of $10 per unit. To cover the fixed costs of $250 with a profit of $10 per unit, CDz needs to sell $250 / $10 = 25 units.

CDz, a Local Music and Video Retailer, Spends $250 a Month