Case: Your group is providing assistance to an entrepreneur planning to start a new business. The group wants to check the feasibility of renting in-line skates to individuals and small groups. To determine this, you need to calculate the break-even point in unit and dollar sales for the year based on the following projections: Rent$ 12,000

Insurance 600

Equipment loan payment (non-skate) 2,400

Utilities (electric, phone, water) 1,440

Wages and salaries 27,600

Advertising 960

Each pair of in-line skates will cost the business $90. The first year’s inventory will consist of 50 pairs.

The projected average sale is $10 per rental. With a six-day-a-week operation, your group projects an average rental of 30 pairs a day, producing sales of $1,800 per week.

Questions:

1.How much are the total fixed costs?

2.How much are total variable costs?

3.What is the variable cost per unit?

4.What is the variable-cost margin?

5.What is the break-even point in units?

6.What is the break even point in dollars?

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