The National Society of Black Engineers (NSBE) Student chapter at SSU wants to c

Question

The National Society of Black Engineers (NSBE) Student chapter at SSU wants to conduct a fund raising activity by preparing and selling some burgers to students. They estimated that each burger will cost $4 to prepare, which they plan to sell for $6. They also thought that they would a purchase a grill machine and some other accessories that will cost them $80. Based on the analysis, they prepared a breakeven chart. Analyze the breakeven chart that the students prepared, and answer the 350 following question a) b) How much is the total Fixed Cost? c) How much is the variable cost/unit? 150 100 50 Show the total cost line and total revenue line on the chart. 10 20 30 40 50 Number of Burgers Calculate the breakeven point algebraically d) e) How much is the loss or profit when the students sell (i) 30 burgers and (ii) 60 burgers? f) How much is the average cost for each case mentioned in part e?

Explanation / Answer

a) Cost of purchasing a machine = 80

Cost of one burger = 4

Cost of x burgers = 4*x

Therefore, Total cost = 80 + 4*x, where x is number of burgers

So, equation for total cost of burger is, y = 80 + 4x, where y is dollar amount of cost

Selling Price of one burger = 6

So, selling price of x number of burgers = 6*x

So, equation for revenue from burger is, y = 6x, where y is dollar amount of revenue

So in the graph red line i.e. the line with the equation y =6x is total reveue line and blue line i.e. with equation y = 80 + 4x is total cost equation

b) Cost of grill machine and other accessories is fixed at 80 and will not change with the quantities of burger prepared, therefore fixed cost is 80

c) Cost of prepairing a burger is 4 and it will change with every burger prepared i.e it is a multiplcation of number of burgers prepared with 4, therefore variable cost is 4x (where x is number of burgers prepared)

d) Breakeven is the the quantity at which revenue equals total cost. So at the breakeven point revenue and total cost line will intersect.

Therefore, at breakeven point 6x = 80 + 4x (revenue and total cost equation calculated previously)

Solving this, 2x = 80

x = 40

So when the students sell 40 burgers they will reach breakeven point.

Breakeven point = 40 burgers

e) Proft = Total Revenue - total cost

If the students sell 30 burgers, total revenue = 6*30 = 180

Total cost = 80 + 4*30 = 80 + 120 = 200

So profit = 180 - 200 = -20, negative sign indicates loss

Therefore, when students sell 30 burgers, loss is 20

If the students sell 60 burgers, total revenue = 6*60 = 360

Total cost = 80 + 4*60 = 80 + 240 = 320

So profit = 360 - 320 = 40

Therefore, when students sell 60 burgers, profit is 40

f) Average cost = Total cost / Number of goods produced

If burgers quantity is 30, total cost = 80 + 4*30 = 200

Average cost = 200/30 = 6.67

If burgers quantity is 60, total cost = 80 + 4*60 = 320

Average cost = 320/60 = 5.33

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