Question

A bicycle store costs ​$3600 per month to operate. The store pays an average of ​$45 per bike. The average selling price of each bicycle is ​$105. How many bicycles must the store sell each month to break​ even?

Answer 1

To calculate the number of bicycles that must be sold to break even, we need to consider the fixed costs (operating costs) and the variable costs (cost per bike).

First, let's find the variable costs per bike sold. The store pays an average of $45 per bike, so the variable cost per bike is $45.

Next, let's calculate the contribution margin per bike. The contribution margin per bike is the selling price minus the variable cost per bike: $105 - $45 = $60.

To calculate the break-even point, divide the fixed costs by the contribution margin per bike: $3600 / $60 = 60.

Therefore, the bicycle store must sell at least 60 bicycles each month to break even.