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If you were producing and selling wine at $5.00 per bottle with variable costs and expenses of $3.00 per bottle, and your total fixed operating costs and expenses were $100,000, how many bottles would you need to sell to break even?

Answer :

Final Answer:

To break even, you would need to sell 40,000 bottles of wine. This covers both your variable costs of $3.00 per bottle and your fixed operating costs of $100,000.

Explanation:

To determine the number of bottles needed to break even in this scenario, you can use the break-even analysis formula. First, you calculate the contribution margin per unit, which is the difference between the selling price and variable cost per bottle.

Here, the selling price is $5.00, and the variable cost is $3.00, resulting in a contribution margin of $2.00 per bottle.

Next, you divide the total fixed operating costs of $100,000 by the contribution margin per unit ($2.00). This calculation yields a break-even point of 50,000 units (bottles).

However, since you cannot sell a fraction of a bottle, you must round up to the nearest whole number, which is 40,000 bottles.

Therefore, to cover both your variable costs and fixed operating costs and achieve a break-even point, you need to sell 40,000 bottles of wine.

This means that after selling this quantity, you would neither make a profit nor incur a loss – your revenue would exactly match your total costs.

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