Darwin Inc. sells a particular textbook for $20. Variable expenses are $14 per book. At the current volume of 50,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:
A)$300,000
B)$1,000,000
C)$1,300,000
D)$700,000

Question

Quizplus · Accepted Answer

The contribution margin per book is $20 - $14 = $6. At the break-even point, the total contribution margin equals the fixed expenses. Therefore, the fixed expenses are $6 * 50,000 = $300,000.