How many cars does Diego Motors sell each month ti break even?
To determine the number of cars Diego Motors needs to sell each month to break even, you will need three pieces of information:
1. Fixed Costs: These are the costs that remain constant regardless of the number of cars sold. Examples include rent, utilities, salaries, insurance, etc.
2. Variable Costs per Car: These are the costs that vary depending on the number of cars sold. Examples include manufacturing costs, vehicle components, sales commissions, etc.
3. Selling Price per Car: This is the price at which Diego Motors sells each car.
Once you have gathered this information, you can use the following formula to calculate the break-even point:
Break-even point (in units) = Fixed Costs / (Selling Price per Car - Variable Costs per Car)
For example, let's say Diego Motors has $100,000 per month in fixed costs, sells each car for $20,000, and incurs variable costs of $15,000 per car. Plugging these values into the formula, the calculation would be:
Break-even point = $100,000 / ($20,000 - $15,000)
Break-even point = $100,000 / $5,000
Break-even point = 20 cars
Therefore, Diego Motors would need to sell at least 20 cars per month to cover all its fixed costs and reach the break-even point. If they sell fewer than 20 cars, they would be operating at a loss, and if they sell more than 20 cars, they would generate a profit.