Question

A typical Latino coffee farmer has fixed costs of $10,000 per year. Under the old distribution system, the farmer is paid $.40 per pound (U.S. weight measure) and the farmer’s variable cost per pound is $.30. What is the farmer’s breakeven point in units (pounds) under the old system? What is the farmer’s breakeven point in dollars?

Under the new distribution system, the farmer is paid $1.26 per pound, what is the farmer’s breakeven point in units (pounds) now? What is the farmer’s breakeven point in dollars?

Answer 1

FarmersProfit: income-costs
Netperlb*W - costperlb*W

So at breakeven, Profit is zero, so set the farmer's profit to zero, and solve for W.