Derst Inc. sells a particular textbook for $30. Variable expenses are $23 per book. At the current volume of 55,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:

Derst Inc. sells a particular textbook for $30. Variable expenses are $23 per book. At the current volume of 55,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:

Multiple Choice

• $1,650,000
• $2,035,000
• $1,265,000
• $385,000

  Correct

Explanation

Unit CM = Selling price per unit – Variable expenses per unit

= $30 per book – $23 per book = $7 per book

Unit sales to break even = Fixed expenses ÷ Unit CM

55,000 books = Fixed expenses ÷ $7 per book

Fixed expenses = 55,000 books × $7 per book = $385,000