Question $\newline$ Tutorial $\newline$ Bella's Burgers sells burgers, fries, and milkshakes. Last month, Bella's Burgers sold $\$20,000$ of burgers, which had associated variable costs of $\$8,000$ ; $\$10,000$ of fries, which had associated variable costs of $\$4,000$ ; and $\$5,000$ worth of milkshakes, which had associated variable costs of $\$2,000$ . Bella's Burgers had total fixed costs of $\$6,000$ . $\newline$ What is Bella's company-wide break-even point? $\newline$ a) $\$21,000$ $\newline$ b) $\$15,000$ $\newline$ c) $\$35,000$ $\newline$ d) $\$10,000$

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Tutorial

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Bella's Burgers sells burgers, fries, and milkshakes. Last month, Bella's Burgers sold

\$20,000

of burgers, which had associated variable costs of

\$8,000

;

\$10,000

of fries, which had associated variable costs of

\$4,000

; and

\$5,000

worth of milkshakes, which had associated variable costs of

\$2,000

. Bella's Burgers had total fixed costs of

\$6,000

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What is Bella's company-wide break-even point?

\newline

\$21,000

\newline

\$15,000

\newline

\$35,000

\newline

\$10,000

Calculate Revenue and Costs: Calculate the total revenue and total variable costs. $\newline$ Total revenue from burgers, fries, and milkshakes is $\$20,000 + \$10,000 + \$5,000$ . $\newline$ Total variable costs from burgers, fries, and milkshakes is $\$8,000 + \$4,000 + \$2,000$ .
Perform Calculations: Perform the calculations from Step $1$ . $\newline$ Total revenue = $\$20,000 + \$10,000 + \$5,000 = \$35,000$ . $\newline$ Total variable costs = $\$8,000 + \$4,000 + \$2,000 = \$14,000$ .
Find Contribution Margin: Calculate the contribution margin. Contribution margin is the difference between total revenue and total variable costs. Contribution margin $= \text{Total revenue} - \text{Total variable costs}.$
Calculate Break-even Point: Perform the calculation from Step $3$ . $\newline$ Contribution margin = $\$35,000 - \$14,000 = \$21,000$ .
Perform Break-even Calculation: Calculate the break-even point. $\newline$ The break-even point is where total revenue equals total costs (variable costs + fixed costs). $\newline$ Break-even point = $\frac{\text{Total fixed costs}}{\text{Contribution margin per dollar of revenue}}$ .
Simplify Calculation: Perform the calculation from Step $5$ . $\newline$ Break-even point = $\$6,000 / (\$21,000 / \$35,000)$ .
Perform Final Calculation: Simplify the calculation from Step $6$ . $\newline$ Break-even point = $\$6,000 / \left(\frac{3}{5}\right)$ .
Perform Final Calculation: Simplify the calculation from Step $6$ . $\newline$ Break-even point = $\$6,000 / \left(\frac{3}{5}\right)$ .Perform the calculation from Step $7$ . $\newline$ Break-even point = $\$6,000 \times \left(\frac{5}{3}\right) = \$10,000$ .