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Activity 4: (this calculation is important for your test) Olukale makes organic hair dye products for men sold in 100ml tubes for a price of £20 per tube. The business pays a monthly rent of £2,000 Each 100ml tube requires material that costs £4.50 Per 1 hour of labour, costing f15,2 tubes can be produced What is the breakeven point in number of tubes for the business?

Question

Activity 4: (this calculation is important for your test)
Olukale makes organic hair dye products for men sold in 100ml tubes for a price of
£20 per tube.
The business pays a monthly rent of £2,000
Each 100ml tube requires material that costs £4.50
Per 1 hour of labour, costing f15,2 tubes can be produced
What is the breakeven point in number of tubes for the business?

Activity 4: (this calculation is important for your test) Olukale makes organic hair dye products for men sold in 100ml tubes for a price of £20 per tube. The business pays a monthly rent of £2,000 Each 100ml tube requires material that costs £4.50 Per 1 hour of labour, costing f15,2 tubes can be produced What is the breakeven point in number of tubes for the business?

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QueenieMaster · Tutor for 5 years

Answer

<p> First rearrange equation by bringing like terms together:<br />£20Q - £12Q = £2000 (transposition)<br />=> £8Q = £2000 (simplification)<br />Therefore the Breakeven point (Q) will be £2000 / £8, which basement values into Q = 250 tubes</p>

Explain

<p> The breakeven point in a business is the point at which total cost (fixed and variable) equals total revenue. Beyond this point, the business starts making profit. Before this point, it is making a loss. <br /><br />In this question, the fixed cost is the monthly rent that the business pays which is £2,000. The variable cost per tube is the material cost (£4.50) and the labour cost. The per unit as hour of labor costs £15 and 2 tubes can be produced. Thus for each tube, the labor cost is £15/2 = £7.5. Combining these, the total variable cost per tube is £4.5 (material) + £7.5 (labor) = £12.<br /><br />Each tube of hair dye is sold for £20. <br /><br />The breakeven quantity would be when the total revenue equals the total cost. If the quantity of tubes sold is represented as Q then, <br /><br />=> the total revenue = £20 * Q<br />=> and the total cost = fixed costs (£2,000) + variable costs per product * quantity<br />=> £2,000 + £12 * Q<br /><br />To get the breakeven point, Total cost (TC) = Total Revenue (TR) which boils down to,<br /><br />=>£20*Q = £2,000 + £12*Q.<br />As seen in both equations Q is the equilibrium amount or number of tubes.</p>
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