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# Fixed annual and variable costs

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The Retread Tire Company recaps tires. The fixed annual cost of the recaping operation is \$60,000. The variable cost of recapping a tire is \$9. The company charges \$25 to recap a tire.
a) For annual volume of 12,000 tires, determine the total cost, total revenue, and profit.
b) Determine the annual break-even volume for the retread Tire Company operation.
c) Grahically illustrate the break-even volume for the Retread Tire Company.

#### Solution Preview

Solution:

a) The total cost is 60000 + 9X, where X is the number of tires recapped.
Thus, when X=12000, the total cost = 60000 + 9 (12000) = \$168000
The total revenue is 25X
Thus, when X=12000, ...

#### Solution Summary

The solution finds the break-even point for the Retread Tire Company, where variable cost per unit is given, as well as volume. This answer bring forth a depiction of whether this company is effective in using its costs wisely to generate profits.

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