Question

Derst Inc. sells a particular textbook for $27. Variable expenses are $20 per book. At the current volume of 43,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:

Answer 1

Answer:

fixed cost = $301,000

Explanation:

Break even =fixed cost / contribution per unit

contribution= selling price - variable cost

contribution = 27 - 20 = $7

fixed costs = break even * contribution

                  = 43000*7 =301,000

Answer 2

Answer:

The annual fixed expenses associated with the textbook is $301,000.

Explanation:

Selling Price = $27

Variable Cost = $20 per unit

Contribution margin = $27 - $20 = $7 per unit

Break-even = 43,000 units

Fixed Cost = ?

Use Break-even formula to calculate fixed cost

Break-even = Fixed cost / Contribution per unit

43,000 = Fixed cost / $7

Fixed Cost = 43,000 x $7

Fixed Cost = $301,000