A retailer incurs a fixed cost of N$ 330when purchasing sugar for his stock. He pays N$15.00 per packet which he resells at N$18.00 per packet. How many packets should he purchase and sell in order to break even?
Let us suppose that he buys X packets. Then his costs are:
X packets at $15 per packet comes to $15X
Fixed cost comes to $330
Total costs = $(330 + 15X)
Sales revenue
He sells the X packets at $18 per packet
Income is $18X
Profit is P = Income - Costs
P = 18X - (330 +15X)
If he breaks even then there is no profit and P = 0, i.e.
18X - (330 + 15X) = 0
18X - 15X = 330
3X = 330
X = 110
Our retailer will break even if he sells 110 packets of sugar
To make a profit, The retailer must buy, and sell, more than 110 packets