To find the break-even point for the Naturally Made Bath and Body store, we need to establish the cost and revenue functions.
Cost Function
The total cost \( C(x) \) consists of both fixed costs (rent and utilities) and variable costs (cost of manufacturing the products).
- Fixed Costs: $550 (rent and utilities)
- Variable Cost per Item: $3.00
The cost function can be expressed as: \[ C(x) = 550 + 3x \] where \( x \) is the number of products sold.
Revenue Function
The revenue \( R(x) \) is generated from selling the products. With an average selling price of $5.50 per item, the revenue function is: \[ R(x) = 5.50x \] where \( x \) is the number of products sold.
Break-even Point
The break-even point occurs when the total cost equals total revenue, i.e., \( C(x) = R(x) \).
Setting the two equations equal to each other, we get: \[ 550 + 3x = 5.50x \]
Now, to find \( x \), solve the equation:
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Subtract \( 3x \) from both sides: \[ 550 = 5.50x - 3x \] \[ 550 = 2.50x \]
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Divide both sides by 2.50: \[ x = \frac{550}{2.50} = 220 \]
Conclusion
Thus, the break-even point is at \( x = 220 \) products sold.
Summary of Functions:
- Cost function: \( C(x) = 550 + 3x \)
- Revenue function: \( R(x) = 5.50x \)
- Break-even point: 220 products sold.