A business produces 4,000 units per month which it sells at $20/unit.Costs include: $10,000 on raw materials,$15,000 in wages for operators and $10,000 in wages to sales people.If the business is just breaking even,what are its fixed costs:
A)$35,000
B)$40,000
C)$45,000
D)$50,000

Question

​A business produces 4,000 units per month which it sells at $20/unit.Costs include: $10,000 on raw materials,$15,000 in wages for operators and $10,000 in wages to sales people.If the business is just breaking even,what are its fixed costs:
A)​$35,000
B)$40,000
C)$45,000
D)​$50,000

Quizplus · Accepted Answer

To break even, the total revenue should be equal to the total cost. 
Total revenue = 4,000 units/month × $20/unit = $80,000/month 
Total cost = Fixed cost + Variable cost 
Variable cost = Cost of raw materials + Wages for operators + Wages to sales people = $10,000 + $15,000 + $10,000 = $35,000/month 
To find the fixed cost, we set the total cost equal to the total revenue: 
Fixed cost + $35,000/month = $80,000/month 
Fixed cost = $45,000/month 
Therefore, the best choice is C) $45,000.

​A Business Produces 4,000 Units Per Month Which It Sells

A Business Produces 4,000 Units Per Month Which It Sells