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Tasty Ice Cream is a year-round take-out ice cream restaurant that is considering offering an additional product, hot chocolate. Considering the additional machine it would need plus cups and ingredients, it estimates fixed costs to be $204 per year and the variable cost to be $0.26. If it charges $1.01 for each hot chocolate, how many hot chocolates does it need to sell in order to break even

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Parrain

Answer: 272 hot chocolates

Explanation:

Assume the quantity sold is x.

Fixed cost = $204

Variable cost = $0.26x

Sales = $1.01x

Breakeven point is where profits are $0.

1.01x - 0.26x - 204 = 0

0.75x -204 = 0

0.75x = 204

x = 272 hot chocolates

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