Question

Question 11

A vendor on Peachtree sells bratwurst hot dogs for $4.15. His cart is open from 9 – 5, Monday through Friday. His variable costs average $0.70 per hot dog (depending mostly on toppings and condiments). He is considering a price increase to $4.70.

Calculate the percent profit breakeven metric for this price change. Report your answer as a percentage (whole number) and round to the nearest percentage point.

Question 12

A vendor on Peachtree sells bratwurst hot dogs for $4.95. His cart is open from 9 – 5, Monday through Friday. His variable costs average $0.80 per hot dog (depending mostly on toppings). He is considering a price decrease to $4.35.

Calculate the percent profit breakeven metric for this price change. Report your answer as a percentage (whole number) and round to the nearest percentage point.

Answer 1

11.

Case 1 ) When the price is $4.15

Unit contribution margin = selling price - variable cost = $4.15 - $0.70 = $ 3.45

Case 2) When the price is $4.70

Unit contribution margin = Selling price - variable cost = $4.70 - $0.70 = $4.00

Now the percentage profit breakeven metric =(4 - 3.45) / 3.45 = 15.94%

rounding to whole number, we get answer as 15.94%

12.

Case 1 ) When the price is $4.95

Unit contribution margin = selling price - variable cost = $4.95 - $0.80 = $ 4.15

Case 2) When the price is $4.35

Unit contribution margin = Selling price - variable cost = $4.35 - $0.80 = $3.55

Now the percentage profit breakeven metric =(3.55 - 4.15) / 4.15 = 14.45%

rounding to whole number, we get answer as 14.45%