Refer to Scenario 9.6 below to answer the question(s) that follow.
SCENARIO 9.6: Celeste borrowed $40,000 from her brother to open a car wash. She pays her brother a 5% yearly return on the money he lent her. Her other yearly fixed costs equal $18,000. Her variable costs equal $40,000. In her first year, Amy sold 40,000 car washes at a price of $2.50 per car wash.
-Refer to Scenario 9.6. Celeste's total costs equal
A) $20,000.
B) $40,000.
C) $60,000.
D) $100,000.

Question

Quizplus · Accepted Answer

Celeste's total costs include the yearly fixed costs, the variable costs, and the interest paid to her brother. The yearly fixed costs are $18,000, the variable costs are $40,000, and the interest paid on the $40,000 loan at 5% is $2,000 ($40,000 * 0.05). Adding these together, $18,000 + $40,000 + $2,000 = $60,000.