The radio station operates 18 hours a day (6 am to midnight), seven days a week, all year. It broadcasts, on average, 20 minutes of on-air advertising per hour. To sell advertising time, the station uses commissioned sales staff who are paid a base salary plus commission that varies according to the volume of sales. The station manager asks you to calculate how many hours of advertising would need to see in order to break even.

Questions

a. List the fixed costs and the variable costs.

b. Determine how many hours of advertising the station must sell in order to cover its costs.

c. Explain how to calculate the break-even point.

Please show work.