The GoodTaste Club collected recipes from members and published a cookbook entitled Eat 'Em Up. The book will sell for $18 per copy. The chairwoman of the cookbook development committee estimated that the club needed to sell 14,600 books to break even on its $87,600 investment.
What is the variable cost per unit assumed in the GoodTaste Club's analysis?
To find the variable cost per unit assumed in the GoodTaste Club's analysis, we need to divide the total investment by the number of books needed to break even.
Variable cost per unit = Total investment / Number of books needed to break even
The total investment is $87,600, and the number of books needed to break even is 14,600.
Variable cost per unit = $87,600 / 14,600
Variable cost per unit = $6
Therefore, the variable cost per unit assumed in the GoodTaste Club's analysis is $6.
To find the variable cost per unit assumed in the GoodTaste Club's analysis, we need to determine the number of units sold and the total variable costs incurred.
We know that the club needs to sell 14,600 books to break even on its $87,600 investment. This means that the total revenue from selling 14,600 books will equal the total cost of the project.
The total revenue can be calculated as the selling price per unit multiplied by the number of units sold:
Total Revenue = Selling Price per Unit * Number of Units Sold
In this case, the selling price per unit is $18 and the number of units sold is 14,600. Therefore, the total revenue is:
Total Revenue = $18 * 14,600
To find the variable cost per unit, we need to subtract the fixed costs from the total cost and divide the result by the number of units sold. The fixed costs are the total investment of $87,600.
Total Variable Costs = Total Cost - Fixed Costs
Total Variable Costs = Total Revenue - Fixed Costs
Substituting the values into the equation:
Total Variable Costs = ($18 * 14,600) - $87,600
Simplifying the equation:
Total Variable Costs = $262,800 - $87,600
Total Variable Costs = $175,200
Now, divide the total variable costs by the number of units sold:
Variable Cost per Unit = Total Variable Costs / Number of Units Sold
Variable Cost per Unit = $175,200 / 14,600
Calculating that:
Variable Cost per Unit = $12
Therefore, the variable cost per unit assumed in the GoodTaste Club's analysis is $12.