Entrepreneurship Certification Practice Exam

The expected break-even point in units for the massage therapist is identified as 3,187 units due to the careful analysis of fixed and variable costs relative to the price charged per service. To determine the break-even point, the formula used is:

Break-even point (in units) = Fixed Costs / (Price per Unit - Variable Costs per Unit)

In this situation, it's essential to understand that fixed costs represent ongoing expenses like rent and salaries that do not change regardless of how many services are provided. The price per unit refers to the fee the therapist charges for each massage session, and variable costs include operational expenses linked directly to each session, such as oils, towels, and other supplies.

When properly calculated, using the provided financial information for the massage therapist, the outcome reveals that they need to service approximately 3,187 clients to cover all their costs before realizing any profit. This number signifies the point where total revenue equals total costs, indicating that the business starts to become financially viable beyond this threshold.

Other figures, such as 2,500, 4,000, and 3,500 units, do not align with this essential calculation, showcasing either an underestimate or overestimate of the break-even point based on the given costs and