Arthur crafts miniature chocolate dollhouses which he sells for $29 each. Arthur has calculated the breakeven...
Arthur crafts miniature chocolate dollhouses which he sells for $29 each. Arthur has calculated the breakeven level of revenues for his business at $1,860 of sales. The dollhouses have a variable cost of $8 to produce per unit.
What are Arthur's fixed costs?
Homework Answers
Profit = Revenue - Cost
From the problem: breakeven REVENUE = $1,860
So, 0 = $1,860 - Cost
Cost = $1,860
Cost = Total cost which is Fixed cost + Variable cost
To calculate Quantity sold , we will use revenue $1,860 at the breakeven point.
Given Sales price per unit = $29
Revenue = Price x Quantity
$1,860 = $29 x Q
Quanity = $1,860/$29 = 64.14units sold
Variable cost per unit =$8
Total Variable cost = 8 x 64.14 units = $513.12 rounded off to =$513
Total Cost = Fixed Cost + Variable cost
$1860 = Fixed Cost + $513
Fixed cost = $1860 - 513
Fixed cost =$1347
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