Question

Tom borrowed​ $40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ $10,000. His variable costs equal​ $25,000. He sold​ 40,000 dozen donuts during the year at a price of​ $2.00 per dozen. ​Tom's total fixed costs equal:

Answer 1

Answer:

$12,000

Explanation:

Data provided

Borrowed amount = $40,000

Rate of interest = 5%

Fixed cost = $10,000

Variable cost = $25,000

Price per dozen = $2.00

The computation of total fixed costs is shown below:-

Return on investment= $40,000 × 5%

= $2,000

Total fixed costs = Fixed cost + return on investment

= $10,000 + $2,000

= $12,000