Randolph Runs a Lemonade Stand and Wants to Make $150

question 127

Essay

Randolph runs a lemonade stand and wants to make $150 in the next week. He sells each cup of lemonade for $0.75, while the variable cost is $0.15 for the cups and ingredients. Fixed costs such as posters and signs are $15.00.
Calculate the following:
a. Contribution margin per unit sold
b. Contribution margin ratio
c. Breakeven point in units
d. Units to be sold to earn the targeted operating income

---

Definitions:

Monopolistically Competitive

A market structure characterized by many sellers offering differentiated products, allowing for some degree of market power.

Fixed Costs

Costs that do not vary with the level of output or production, such as rent, salaries, and equipment maintenance.

Short Run

A period in economics during which some factors of production are fixed, affecting output levels and costing.

Monopolistically Competitive

A market structure characterized by many sellers offering differentiated products, leading to some degree of market power and price setting.