Question

Arthur crafts miniature chocolate dollhouses which he sells for $23 each. Arthur has calculated the breakeven level of revenues for his business at $1,460 of sales. The dollhouses have a variable cost of $8 to produce per unit.What are Arthur's fixed costs?

Answer 1

Answer:

Arthur's fixed costs are $952

Explanation:

The break-even point is the level of production at which the costs of production equal the revenues for a product and calculated by using following formula:

Break-even point in units = Fixed costs/(Selling price per unit-Variable cost per unit)

Fixed costs = Break-even point in units x (Selling price per unit-Variable cost per unit)

In Arthur, Break-even point in units = $1,460/$23

Fixed costs = $1,460/$23 x ($23 - $8) = $952