At the accounting break-even point, Swiss Mountain Gear sells 22,940 ski masks at a price of $19 each. At this level of production, the depreciation is $67,000 and the variable cost per unit is $6. What is the amount of the fixed costs at this production level?
A) $231,220
B) $259,400
C) $161,330
D) $187,660
E) $145,600

Question

Quizplus · Accepted Answer

The accounting break-even point is where total revenue equals total costs (which include both fixed and variable costs). To find the fixed costs, we first calculate the total revenue and the total variable costs, and then account for depreciation since it's a non-cash fixed cost that affects the break-even calculation.Total Revenue = Price per unit * Quantity = $19 * 22,940 = $435,860Total Variable Costs = Variable cost per unit * Quantity = $6 * 22,940 = $137,640To find the fixed costs, we subtract the total variable costs and depreciation from the total revenue:Fixed Costs + Depreciation = Total Revenue - Total Variable CostsFixed Costs = Total Revenue - Total Variable Costs - Depreciation = $435,860 - $137,640 - $67,000 = $231,220

At the Accounting Break-Even Point, Swiss Mountain Gear Sells 22,940