Asked by Jocelyn 30545 Leon on Jul 08, 2024
Verified
Derst Incorporated sells a particular textbook for $25. Variable expenses are $13 per book. At the current volume of 42,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:
A) $504,000
B) $1,050,000
C) $1,554,000
D) $546,000
Variable Expenses
Costs that change in proportion to the activity of a business, such as sales or production levels.
Fixed Expenses
Costs that do not change in total despite fluctuations in the volume of goods or services produced or sold.
Annual Sales
The total revenue generated from the sale of goods or services in one fiscal year.
- Digest the concept of the break-even point and the pathway to calculate it in both units and dollars.
Verified Answer
EF
Emmanuel FrimpongJul 09, 2024
Final Answer :
A
Explanation :
The break-even point occurs when total revenue equals total expenses. At break-even, the revenue from selling 42,000 books at $25 each is $1,050,000 (42,000 * $25). The variable cost for these books is $546,000 (42,000 * $13). To find the fixed costs, subtract the total variable costs from the total revenue at the break-even point, which gives $504,000 ($1,050,000 - $546,000).
Learning Objectives
- Digest the concept of the break-even point and the pathway to calculate it in both units and dollars.