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Derst Inc

Management

Derst Inc. sells a particular textbook for $29. Variable expenses are $21 per book. At the current volume of 44,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:

 

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Computation of Annual Fixed Expenses:

At Break-even, there is no profit or loss. In other words , contribution is equal to fixed costs.

Contribution = Units Sold * (Selling Price - Variable Expense)

= 44,000 * ($29 - $21)

= $352,000

So, Fixed Cost is equal to $352,000.

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