I need some help I have the numbers I need but do not understand how to do break even points. The formula is PX = A + BX
where P = Unit cost or price of the service
X = Amount of service to be provided (an unknown)
A = Fixed costs
B = Variable costs
The numbers are
The years I need help with are for years 2003 and 2004 the total number of fixed costs 2003 being the first year and 2004 being the second numbers are Rent and Utilities $150,000.00 $150,000.00
Telephone $0 $24,000.00 $24,000.00 Payroll and benefits $520,069.00 $915,787.20
Supplies $171,622.77 $320,525.52 the second is the variable costs because they change from year to year so what I need help with is how many customers would I need to serve in order to break even with my costs
To calculate the break-even point, you need to determine the number of customers (X) required to cover the total costs (A + BX) with the unit cost or price of the service (P).
First, let's calculate the fixed costs (A) for each year:
- For 2003, add the Rent and Utilities cost and the Telephone cost: $150,000 + $0 = $150,000.
- For 2004, add the Rent and Utilities cost, the Telephone cost, and the Payroll and benefits cost: $150,000 + $24,000 + $520,069 = $694,069.
Next, let's calculate the variable costs (B) for each year:
- For 2003, add the Payroll and benefits cost and the Supplies cost: $520,069 + $171,622.77 = $691,691.77.
- For 2004, add the Payroll and benefits cost and the Supplies cost: $915,787.20 + $320,525.52 = $1,236,312.72.
Now, you can plug these values into the break-even point formula (PX = A + BX):
- For 2003, the formula becomes PX = $150,000 + $691,691.77X.
- For 2004, the formula becomes PX = $694,069 + $1,236,312.72X.
To find the break-even point in terms of the number of customers (X), you need to solve for X when the revenue (PX) equals the total costs (A + BX). This means setting the left-hand side of the equation equal to the right-hand side of the equation and solving for X. However, since we don't have the unit price (P), we can't provide a specific answer.
To find the break-even point in terms of the number of customers for both years, you would need to know the unit price (P) for each year. Once you have that information, you can substitute it into the relevant equation and solve for X.