You decide to market your own custom computer software. You must invest $3,255 for computer hardware, and spend $2.90 to buy and package each disk. If each program sells for $13.75, how many copies must you sell to break even?
To find out how many copies you need to sell to break even, we first need to calculate the total cost of producing each copy and then divide that by the profit per copy.
1. Calculate the cost per copy:
- Cost of computer hardware: $3,255
- Cost of each disk: $2.90
Total cost per copy = Cost of computer hardware + Cost of each disk
= $3,255 + $2.90
= $3,257.90
2. Calculate the profit per copy:
- Selling price per copy: $13.75
Profit per copy = Selling price per copy - Cost per copy
= $13.75 - $3,257.90
= -$3,244.15 (negative value means loss per copy)
Since the profit per copy is negative, it means you are making a loss on each copy sold. To break even, you need to sell enough copies to cover the total investment.
3. Calculate the number of copies needed to break even:
- Total investment = Cost of computer hardware
= $3,255
Number of copies needed to break even = Total investment / Profit per copy
= $3,255 / -$3,244.15
To perform the final calculation, divide the total investment by the profit per copy.