A company has a one-time start up fee of $1000. The company makes x items that cost $20 each to make. The company sells the items for $30 each.
a. Write the profit equation.
b. What is the profit if they make 600 items?
c. What is the break even point?

a. The profit equation (P) = $10x - $1,000

b. The profit if they make 600 items is $5,000

c. Break-even point in units: 100 units

Break-even point in sales: $3,000

Explanation:

The company has a one-time start up fee of $1,000. This is the fixed cost.

The company makes x items that cost $20 each to make and sells the items for $30 each.

The profit equation (P) = Sales - Total variable costs - Fixed costs = $30x - $20x - $1,000 = $10x - $1,000

If the company makes 600 items,

The profit = $10 x 600 - $1,000 = $5,000

The break-even point is calculated by using following formula:

Break-even point in units = Fixed cost/(Selling price per unit-Variable cost per unit)  = $1,000/($30 - $20) = 100 units

Break-even point in sales = 100 x $30 = $3,000

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