Suppose You Are the Owner of a Picture Frame Store

question 201

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) . What is the quantity of picture frames you will need to sell to break even?

• A)200 picture frames
• B)400 picture frames
• C)800 picture frames
• D)1,600 picture frames
• E)2,000 picture frames

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