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?

Question

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.