Question

Southwest U's campus book store sells course packs for $19 each. The variable cost per pack is $12, and at current annual sales of 43,000 packs, the store earns $75,000 before taxes on course packs. How much are the fixed costs of producing the course packs? $203,400 $277,980 $253,120 $226,000 $221,480

Answer 1

Answer:

The correct answer is D.

Explanation:

Giving the following information:

Selling price= 19

Variable cost per pack= 12

At a current annual sales of 43,000 packs, the store earns $75,000 before taxes on course packs.

First, we need to calculate the total variable cost.

Total variable cost= 12*43,000= 516,000

Now, we can calculate the total contribution margin:

Contribution margin= (19*43,000) - 516,000= 301,000

The earnings before taxes is the result of deducting from the contribution margin the fixed costs.

Fixed costs= contribution margin - earnings before taxes

Fixed costs= 301,000 - 75,000= 226,000