You are considering the start of a small business that sells generator gaskets. According to your market research, you can sell each gasket for $12. Your fixed costs for the business are estimated at $35,000 and you estimate your variable costs to be $6 per gasket.
How many units will you have to sell to break even in the business? Calculate the breakeven point in units, and then in dollars.
In order to make the business a worthwhile activity, you require a $20,000 profit. How many units would you have to sell to make this venture worthwhile?
Explain how breakeven analysis can be useful to the person starting a small business and/or to an existing small business.