KMW Inc Sells a Finance Textbook for $150 Each

question 4

Multiple Choice

KMW Inc. sells a finance textbook for $150 each. The variable cost per book is $30 and the fixed cost per year is $30,000. The process of creating a textbook costs $150,000 and the average book has a life span of 3 years. Using straight line depreciation and a tax rate of 25%, what is the economic or present value break even number of books that must be sold given a discount rate of 12%?

• A) 582
• B) 667
• C) 805
• D) 953

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Definitions:

Cost Distribution

The process of assigning or allocating an organization's costs to specific cost objects, such as products or departments.

Support Department Cost Allocation

The distribution of overhead costs from auxiliary departments (like maintenance or HR) to producing departments based on relevant allocation bases.

Support Department Cost Allocations

The process of distributing indirect costs from service departments to the departments that directly contribute to revenue generation.

Direct Method

A technique in cost accounting where only direct costs are assigned to cost objects, ignoring indirect costs.