Greg Morrison recently graduated from mortuary school. He is considering opening his own funeral home. A funeral home is a high-fixed cost business, as it requires considerable expenditures for facilities, labor, and equipment, no matter how many families are served. Assume the annual fixed cost of operations is $800,000. Further assume that the only significant variable cost relates to burial containers like urns and caskets. An average casket costs $1,200. Greg's banker has asked a variety of questions in contemplation of providing a loan for this business. If the average family is charged $6,000 for services and a burial container, how many families must be served to clear the break-even point?
Greg Morrison recently graduated from mortuary school. He is considering opening his own funeral home. A funeral home is a high-fixed cost business, as it requires considerable expenditures for facilities, labor, and equipment, no matter how many families are served. Assume the annual fixed cost of operations is $800,000. Further assume that the only significant variable cost relates to burial containers like urns and caskets. An average casket costs $1,200. Greg's banker has asked a variety of questions in contemplation of providing a loan for this business. If the average family is charged $6,000 for services and a burial container, how many families must be served to clear the break-even point?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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| Greg Morrison recently graduated from mortuary school. He is considering opening his own funeral home. A funeral home is a high-fixed cost business, as it requires considerable expenditures for facilities, labor, and equipment, no matter how many families are served. Assume the annual fixed cost of operations is $800,000. Further assume that the only significant variable cost relates to burial containers like urns and caskets. An average casket costs $1,200. Greg's banker has asked a variety of questions in contemplation of providing a loan for this business. |
| If the average family is charged $6,000 for services and a burial container, how many families must be served to clear the break-even point? |
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