A firm with constant variable costs has a survival revenue breakeven of $375,000. This year it had $250,000 in sales, $100,000 of which was a fixed cost. What are the firm's cash fixed costs?
A) $150,000
B) $225,000
C) $625,000
D) $937,500

Question

Quizplus · Accepted Answer

The firm's cash fixed costs are calculated by subtracting the sales from the survival revenue breakeven: $375,000 - $250,000 = $125,000. Since $100,000 is already accounted for as fixed costs, the remaining $25,000 must be cash fixed costs.

A Firm with Constant Variable Costs Has a Survival Revenue