Question

Greenjeans & Co. presently provides a weekly maintenance service to 140 homes. Variable costs per customer amount to approximately $10 per week for labor, mileage, and supplies. Fixed costs are approximately $12,000 per quarter. Customers pay $270 per quarter for the weekly service. All contracts are written for one quarter. (There are 13 weeks in one quarter.) How many customers are required to break even?

Answer 1

Answer:

86 customers per quarter

Explanation:

Given,

Per quarter = 13 weeks

Fixed Cost = $12,000 per quarter

Variable cost = $10 per week x 13 weeks = $130 per quarter

Selling cost = $270 per quarter

We know,

Break-even point = $\frac{Fixed Cost}{Selling Cost - Variable Cost}$

Putting the value in the formula,

Break-even point = $\frac{12,000}{270 - 130}$

Break-even point = 85.71 or 86 customers per quarter.