Title: Understanding Arthur's Breakeven Analysis for Miniature Chocolate Dollhouses

What is Arthur's breakeven level of revenues for his business selling miniature chocolate dollhouses?

Arthur crafts miniature chocolate dollhouses which he sells for $22 each. He has calculated the breakeven level of revenues for his business at $1,280 of sales.

Answer:

The breakeven level of revenues is the point at which a business neither makes a profit nor incurs a loss. In this case, Arthur has calculated that his breakeven point is at $1,280 of sales. To determine the breakeven point, we need to consider the fixed costs and the variable costs.

Understanding Arthur's Breakeven Analysis

Fixed costs are expenses that do not change regardless of the level of production or sales. In this case, the fixed costs are not provided in the question, so we cannot calculate them. Variable costs, on the other hand, are costs that vary with the level of production or sales. For each miniature chocolate dollhouse that Arthur sells, the variable cost to produce it is $12.

To calculate the breakeven point in terms of the number of dollhouses Arthur needs to sell, we can use the formula:

Breakeven Point (in units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

However, since the fixed costs are not given in the question, we cannot calculate the breakeven point in terms of the number of dollhouses. In conclusion, we know that Arthur's breakeven level of revenues is $1,280 of sales, but we cannot determine the exact number of dollhouses he needs to sell to reach that level without knowing the fixed costs.

Understanding breakeven analysis is crucial for businesses to make informed decisions about pricing, production levels, and profitability. It helps business owners like Arthur determine at what point their sales will cover all expenses and start generating profit. By analyzing fixed costs, variable costs, and selling price, businesses can set goals and strategies to achieve financial success.