# For raymond the total cost of opening the new branch

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For Raymond, the total cost of opening the new branch and remaining open for one year will be: A. \$500, 000. B. \$550,000. C. \$650,000. D. \$450,000. E. \$605,000. Total costs = fixed costs + variable costs, or 500,000 + (1,000 x 50) = \$550,000. Revenues are not a factor when calculating total costs. AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 13-01 List the four pricing orientations. Topic: 5 Cs of Pricing 102. (p. 277) At the break-even point: The break-even point is the place where revenues match total costs, and profits are zero. AACSB: Analytic Blooms: Remember Difficulty: 1 Easy Learning Objective: 13-04 Describe how to calculate a product's break-even point. Topic: 5 Cs of Pricing 103. (p. 278) The break-even point is estimated by:

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Contribution per unit is the revenue "left over" after covering variable costs. Break-even point calculates the number of units' contribution needed to cover fixed costs. AACSB: Analytic Blooms: Understand Difficulty: 2 Medium Learning Objective: 13-04 Describe how to calculate a product's break-even point. Topic: 5 Cs of Pricing 104. (p. 278) If the fixed costs of manufacturing a new cell phone are \$10,000, the sales price is \$60, and variable cost per unit is \$20, the break-even point is: Contribution per unit is \$60-\$20 = \$40. Then we divide the fixed costs by the contribution per unit. \$10,000 divided by \$40 = 250 units. AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 13-01 List the four pricing orientations. Topic: 5 Cs of Pricing 105. (p. 278) Jacob rents rooms in his hotel for an average of \$100 per night. The variable cost per rented room is \$20, to cover maid service and utilities. His fixed costs are \$100,000 and his profit last year was \$20,000. For Jacob, the contribution per unit is: A. \$10 0 B. \$80 C. \$800 D. \$1,000 E. It cannot be determined from the information provided.
Contribution per unit = Revenue - variable cost = \$100 - \$20 = \$80. His fixed costs and profit are not needed for this calculation. AACSB: Analytic Blooms: Apply Difficulty: 3 Hard Learning Objective: 13-04 Describe how to calculate a product's break-even point. Topic: 5 Cs of Pricing 106. (p. 278)

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