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.
Required:
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.