Suppose You Are the Owner of a Picture Frame Store

question 78

Multiple Choice

Suppose you are the owner of a picture frame store and you wish to calculate how many frames you must sell to cover your fixed and variable costs at a given price. Let's assume that the demand for your frames is strong, so the average price customers are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC) total $32,000 (real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a picture frame is $40 (labor, glass, frame, and matting) . If your picture frame store sold 2,000 picture frames, what would your profit (or loss) be?

• A)a loss of $32,000
• B)$0-just able to break even
• C)$32,000 profit
• D)$112,000 profit
• E)$128,000 profit

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