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John sells pushchairs on eBay. He buys the pushchair from China at a wholesale price of £350 and resells them for £450. He also needs to store them before they are buying dispatched so he rented a garage space for £800 a month.
a. What is the equation to calculate the profit?
b. How many pushchairs does John need to sell to break even?
c. If John were to sell 23 pushchairs, what would be his profit/loss?(a) Selling price – Cost (£450-£350) = £100
profit = £100
fixed cost = 800 per month(b) to break even , sales = costs , where there is no profit or loss.
units to be sold to break even in unit = fixed costs/contribution per unit = 800/100= 8 units
(c) 23*450 per units = £10,300 as sales revenue
10,300-8050( 350 costs per unit of pushchairs * 23) = £2,250.Sir please, is this correct ?
but answers from the book differes
= profit (£450 – £350) * 23 – £800
= (£100 * 23) – £800
= £2300 – £800
= £1500Profit equation = Total income – total expendition
Thank you sir , i forget to account for the fixed cost
£100*23-£800= £1500.Breakeven in units = £800/£100= 8 units meaning the business must sell minimum of 8 units per month to break even.
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