Let’s Say You Want to Open a Shoe Store That

question 77

Multiple Choice

Let’s say you want to open a shoe store that will specialize in high-end shoes. But before you do, you want to determine how many pairs of shoes you have to sell in the first year to break even (have no profit or loss) . You also want to know what your profit will be in year two. You have been busy estimating some revenues and costs. Here is what you have so far:


-How much are total fixed costs?

• A)$600,250
• B)$600,000
• C)$250
• D)$90

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Definitions:

Fixed Expenses

Costs that remain constant for a set period of time, regardless of changes in the level of production or sales volume.

Break-Even Sales

The amount of revenue required to cover both the fixed and variable costs of a business, resulting in neither profit nor loss.

Variable Expenses

Expenses that directly correlate and adjust with the alterations in the amount of activity or the quantity of production.

Fixed Expenses

These are costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance.