Suppose that you own a video store that has total costs of ...

Suppose that you own a video store that has total costs of $\$ 3,600$ per month. If you charge $\$ 12$ for each DVD you sell, how many do you need to sell each month in order to break even? Explain how you arrived at your answer.

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Key Concepts

Break-Even Analysis

Break-even analysis involves determining the number of units that must be sold to cover all fixed and variable costs, resulting in neither profit nor loss. This is calculated by setting total revenue equal to total costs and solving for the quantity, making it a fundamental tool in business planning and financial decision-making.

Fixed Costs

Fixed costs are expenses that do not change with the level of production or sales. In this context, the monthly cost of operating the business remains constant regardless of how many units are sold, meaning these costs must be covered before any profit can be made.

Unit Price and Revenue

The unit price is the amount charged for each product sold, which directly contributes to the total revenue. By dividing the fixed costs by the unit price, you can determine the minimum number of units that must be sold to cover all fixed costs, achieving a break-even situation.

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