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22 September, 01:03

Southwest U's campus book store sells course packs for $19 each. The variable cost per pack is $12, and at current annual sales of 43,000 packs, the store earns $75,000 before taxes on course packs. How much are the fixed costs of producing the course packs? $203,400 $277,980 $253,120 $226,000 $221,480

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  1. 22 September, 01:13
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    The correct answer is D.

    Explanation:

    Giving the following information:

    Selling price = 19

    Variable cost per pack = 12

    At a current annual sales of 43,000 packs, the store earns $75,000 before taxes on course packs.

    First, we need to calculate the total variable cost.

    Total variable cost = 12*43,000 = 516,000

    Now, we can calculate the total contribution margin:

    Contribution margin = (19*43,000) - 516,000 = 301,000

    The earnings before taxes is the result of deducting from the contribution margin the fixed costs.

    Fixed costs = contribution margin - earnings before taxes

    Fixed costs = 301,000 - 75,000 = 226,000
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