Question

Question 1 (8 points) Ocean City Kite Company manufactures & sells kites for $7.50 each. The variable cost per kite is $3.50 with the current annual sales volume of 55,000 kites. This volume is currently Ocean City Kite's breaking even point. Use this information to determine the dollar amount of Ocean City Kite Company's fixed costs. (Round dollar value to the nearest whole dollar & enter as whole dollars only.)

Answer 1

The correct answer is $220,000.

Step-by-step explanation:

According to the scenario, computation of the given data are as follows:

Selling price = $7.5

Variable cost = $3.5

Annual sales = 55,000 kites

We can calculate the fixed cost by using following formula:

Fixed cost = Annual sales × ( Selling price - Variable cost )

Fixed cost = 55,000 × ( $7.5 - $3.5 )

= 55,000 × $4

= $220,000