The owner of a small restaurant that sells takeout fried chicken and biscuits each month pays $2,500 in rent, $500 in utilities, $750 interest on his loan, insurance premium of $200, and $250 on advertising on local buses. A bucket of chicken is priced at $9.50. Unit variable costs for the bucket of chicken are $5.50. How many buckets of chicken does the restaurant need to sell to break even each month?
A) 442 buckets
B) 764 buckets
C) 1,050 buckets
D) 3,150 buckets
E) 4,200 buckets

Question

Quizplus · Accepted Answer

To find the break-even point, calculate the total fixed costs and divide by the contribution margin per unit. Fixed costs are $2,500 (rent) + $500 (utilities) + $750 (interest) + $200 (insurance) + $250 (advertising) = $4,200. The contribution margin per bucket is $9.50 (price) - $5.50 (variable cost) = $4.00. Break-even point = $4,200 / $4.00 = 1,050 buckets.

The Owner of a Small Restaurant That Sells Takeout Fried