Smitty's Smoothies Has Fixed Costs of $1,600 Per Month

Multiple Choice

Smitty's Smoothies has fixed costs of $1,600 per month. The only variable costs Smitty incurs are for the ingredients and labor needed to produce smoothies. These costs are $1.50 per drink. Smitty' Smoothies sells its delicious concoctions for $3.50 each. Which of the following statements is correct?

A) Smitty's will be able to earn a profit if it can sell more than 400 smoothies each month.
B) In order to break even, Smitty's must sell at least 800 smoothies each month.
C) In order to stay in business, Smitty's must reduce its price to at least $3.00 per smoothie.
D) Smitty's will maximize its profits at a sales volume of 560 smoothies per month.