Assume that Cheryl’s Posters, a small poster retailer, has fixed operating costs of $2,500, its sale… 1 answer below »

Assume that Cheryl’s Posters, a inferior poster retailer, has urban permitted consumes of $2,500, its sale worth per item (poster) is $10, and its wavering permitted consume per item is $5. Applying Equation 12.3 to these grounds yields


At sales of 500 items, the steadfast’s EBIT should righteous correspondent $0. The steadfast earn possess unconditional EBIT for sales elder than 500 items and privative EBIT, or a privation, for sales close than 500 items. We can consteadfast this by substituting values overhead and adown 500 items, concurrently after a while the other values attached, into Equation 12.1.

Equation 12.1

EBIT=(Q)-FC-(VC Q) (12.1)

Equation 12.3