suppose a retail business sells its commodity at a margin of 25% on all items purchased and sold.moreover the company used a 5% commission as saving expense and 12000 at a fixed cost.find the breakeven revenue
To find the breakeven revenue, we need to calculate the total cost and then determine the revenue needed to cover that cost.
First, let's calculate the total cost.
The fixed cost is given as $12,000.
The variable cost consists of two components:
1. The cost of goods sold (COGS), which is the amount spent on purchasing the items sold.
2. The commission expense, which is a percentage of the selling price.
The margin is given as 25%, which means the cost of goods sold is 75% of the selling price. Similarly, the commission expense is 5% of the selling price.
To calculate the total variable cost, we need to consider both the COGS and commission expense.
Let's assume the selling price of an item is 'x'.
The cost of goods sold (COGS) will be 75% of 'x' or 0.75x.
The commission expense will be 5% of 'x' or 0.05x.
So, the total variable cost will be (0.75x + 0.05x) = 0.8x.
Now we can calculate the total cost, which is the sum of the fixed cost and the variable cost:
Total Cost = Fixed Cost + Total Variable Cost
= $12,000 + 0.8x
To find the breakeven revenue, we need to set the revenue equal to the total cost:
Revenue = Total Cost
Therefore, to find the breakeven revenue, we can set up the equation:
Revenue = $12,000 + 0.8x
To calculate the breakeven revenue, we need to solve for 'x' in the equation.