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

Question

Business

Ariel Huerta

16 July, 08:50

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

+1

Answers (1)

Know the Answer?

Brendan Spencer · Answer 1

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