Backstreet Books, an Eclectic Bookstore on a Large College Campus

question 276

True/False

Backstreet Books, an eclectic bookstore on a large college campus generated total revenues of $15 million while incurring expenses of $12 million. During the year Backstreet Books earned a profit of $3 million.

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Definitions:

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and to provide profit to the company.

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance.

Variable Costs

Expenditures that adjust based on the quantity of production or the scale of sales.