Derst Incorporated sells a particular textbook for $140. Variable expenses are $25 per book. At the current volume of 6,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:
A) $400,000
B) $690,000
C) $840,000
D) $150,000

Question

Quizplus · Accepted Answer

The break-even point occurs when total revenue equals total expenses (fixed + variable). Revenue per book is $140, and variable cost per book is $25, so the contribution margin per book is $140 - $25 = $115. At 6,000 books, the total contribution margin is 6,000 * $115 = $690,000, which must equal the fixed expenses at break-even.

Derst Incorporated Sells a Particular Textbook for $140