Charlie's Hotdog Stand Charlie's Hotdog Stand sells hotdogs for $2.50 each. The variable costs per hotdog are $.50. Charlie's fixed costs are currently $800 per month. Charlie is considering expanding his business to three hotdog stands which will increase fixed costs per month by $1,200.
Refer to the Charlie's Hotdog Stand information above. If Charlie does expand his business to three stands, how many hotdogs will need to be sold per month in order to earn a target profit of $5,000?

Question

Quizplus · Accepted Answer

To calculate the number of hotdogs needed to be sold to achieve a target profit, use the formula: (Fixed Costs + Target Profit) / (Selling Price per Hotdog - Variable Cost per Hotdog). The new fixed costs are $800 + $1,200 = $2,000. The target profit is $5,000. The contribution margin per hotdog is $2.50 - $0.50 = $2.00. Therefore, ($2,000 + $5,000) / $2.00 = 3,500 hotdogs.

Charlie's Hotdog Stand Charlie's Hotdog Stand Sells Hotdogs for $2