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Break Even - Fixed and Variable Expenses Student Worksheet Name

The document discusses fixed and variable expenses for an ice cream parlor business. It provides examples of fixed expenses like rent, utilities, and payroll which remain constant each month. Variable expenses like ingredients and supplies fluctuate based on the number of ice creams sold. Equations are given to model monthly expenses and revenues as functions of sales. The document determines that the business needs to sell around 120 ice creams per month to break even on expenses.

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nouman khan
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127 views

Break Even - Fixed and Variable Expenses Student Worksheet Name

The document discusses fixed and variable expenses for an ice cream parlor business. It provides examples of fixed expenses like rent, utilities, and payroll which remain constant each month. Variable expenses like ingredients and supplies fluctuate based on the number of ice creams sold. Equations are given to model monthly expenses and revenues as functions of sales. The document determines that the business needs to sell around 120 ice creams per month to break even on expenses.

Uploaded by

nouman khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Break Even – Fixed and Variable Expenses

Student Worksheet Name:__________________

FIXED AND VARIABLE EXPENSES


You want to open an ice cream parlor/store.
1. Based on the previous discussion, is this business likely to have higher fixed costs or
variable costs? Why?

2. What are some of the fixed expenses associated with this business?

3. What are some of the variable expenses associated with this business?

4. If one person comes in to buy ice cream or 100 people come in to buy ice cream, how
does this affect your expenses in general?

5. What would be some of your initial, or start-up costs?

You have determined that the expenses for this business are as follows:

Fixed Expenses Monthly Cost Variable Expenses Cost per sale/each


Store rental $930 Ice cream $0.50
Utilities $400 Cones/Cups $0.15
Payroll: 2 employees - $2,720 Spoons $0.05
$8.50/hour – 40 hours
per week
Insurance $100 Toppings $0.13
Advertising/Marketing $100 Napkins $0.02
Total $4,250.00 Total $0.85

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6. Each ice cream that you sell comes with a fixed portion of ice cream, a cup or cone, a
spoon, a topping of choice, and a napkin. Explain the cost per sale/each.

7. Write an equation that models your monthly expenses as a function of the number of ice
cream you sell, incorporating both your fixed and variable expenses. Let y = total
monthly expenses ($) and x = # of ice creams you sell per month.

8. As the number of ice creams you sell per month increases, how does this affect your
monthly expenses?

9. You decide to sell your product for $3.35. Write an equation that models your total
monthly revenues as a function of the number of ice creams you sell. Let y = total
monthly revenues ($) and x = # of ice creams you sell per month.

10. As the number of ice creams you sell per month increases, how does this affect your
monthly revenues?

11. What is the starting point of the monthly expenses (when you have sold 0 ice creams)?

12. What is the starting point of your monthly revenues (when you have sold 0 ice creams)?

13. Which increases at a faster rate, your expenses or revenues? How do you know?

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14. How many ice creams do you need to sell each month to break even? (When do the lines
meet?) Solve this numerically.

15. If you are open 7 days a week for a total of 40 hours per week (and there are
approximately 4 weeks per month), approximately how many ice creams is this per day?

16. Your initial investment costs for this business including the freezers, scoops, cash
register, and signage totaled $7,000. If you believe that you can sell 2,100 ice creams per
month for $3.50 each, estimate how long it will take you to break even accounting for
this initial investment.

17. What are your monthly revenues now?

18. Write an equation that models cumulative total revenues as a function of the time (in
months). Let y = revenues ($) and x = # of months.

19. Write an equation that models cumulative total expenses, accounting for both initial and
fixed expenses, as a function of time (in months). Let y = expenses ($) and x = # of
months.

20. At what point do these lines meet? Solve this numerically and graphically.

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