Question

Andy, a 10-year-old boy, wants to sell lemonade on a hot summer day. He hopes to make enough money to buy a new iPod. Joe, his elder brother, tries to help him compute his prospect of doing so. The following is the relevant information:
Variable costs
Lemonade ........ $0.30 per cup
Paper cups ........ $0.10 per cup
Fixed costs
Table and chair ...... $36.00
Price ............ $1.00 per cup
The following graph depicts the dollar amount of cost or revenue on the vertical axis and the number of lemonade cups sold on the horizontal axis.


Required
a. Draw a line that depicts the total cost.
b. Draw a line that depicts the total revenue.
c. Identify the break-even point.
d. Identify the area representing profit.
e. Identify the area representingloss.


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  • CreatedFebruary 07, 2014
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