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3. TJ publisher sells finance textbooks for $100 each. The variable cost per book is $60....

3. TJ publisher sells finance textbooks for $100 each. The variable cost per book is $60. At current annual sales of 10,000 books, the publisher is just breaking even. What is its current level of fixed costs?

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Answer #1

For breakeven condition, sales revenue generated=Cost incurred
Costs will be both variable and fixed cost.
Cost for each text book=$100 and total number of textbooks sold=10000. Total revenue generated=(Cost for each text book)*(Total number of textbooks sold)
=$100*10000=$1000000
The variable cost per book is $60 and total number of textbooks sold=10000. So, total variable cost=(Variable cost per book)*(Total number of textbooks sold)
=$60*10000=$600000
Now, Variable cost+Fixed cost=Total revenue generated
=>$600000+Fixed cost=$1000000
=>Fixed cost=$1000000-$600000=$400000
Current level of fixed costs=$400000

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