Elizabeth is the manager of a new spa opening in Gainesville and wants to know how much to charge for a massage. She knows that her fixed costs are $1850 and her variable costs per massage are $25. Furthermore, she assumes that her staff can give 50 massages per day. To break even, she would have to charge what price?

$62

Explanation:

Breakeven point is the production level at which the revenue gained is equal to the cost incurred in producing a product.

It is an important consideration because businesses can plan on how to increase profits by producing more above this level.

The formula for break-even is given as

Breakeven= Fixed cost ÷(Price - Variable cost)

To get the price to breakeven, we will take breakeven point as 50 massages per day

50= 1,850 ÷ (Price - 25)

50* (Price - 25)= 1,850

(50* price) - (50* 25)= 1,850

Price = (1,850 + 1,250) ÷ 50

Price= $62

Sales Price = $62

Explanation:

Break-Even formula:

⇒ Break-Even Units =             Fixed Costs                

                                     Sales Price - Variable Costs

⇒  50  =             1850      

                Sales Price - 25

⇒ Sales Price - 25 = 1850

                                    50

⇒ Sales Price - 25 = 37

⇒ Sales Price = 37 + 25

⇒ Sales Price = $62

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