Using fixed costs of $100 and variable costs of $5 per meal, what is the selling price to achieve a break-even point of 20 meals?

To determine the selling price needed to achieve a break-even point of 20 meals, it is essential to understand the concepts of fixed costs, variable costs, and how to calculate the break-even point.

Fixed costs represent the operating expenses that do not change with the number of meals served, which in this case is $100. The variable costs per meal, which are costs that vary with each meal prepared, are $5.

To find the required selling price per meal to break even, the total costs must first be determined. This includes both fixed and variable costs. The total variable cost for 20 meals can be calculated by multiplying the variable cost per meal ($5) by the number of meals (20), which equals $100 in variable costs.

Next, the total cost to provide 20 meals combines the fixed and variable costs:

• Fixed costs: $100

• Variable costs for 20 meals: $100

Adding these together gives a total cost of $200 for 20 meals.

At the break-even point, total revenue equals total costs. Therefore, the total revenue needed to break even would also be $200. To find the selling price per meal, divide the total revenue required by the number of meals: