Question

A firm expects to sell 26,300 units of its product at $18 per unit. Pretax income is predicted to be $61,300. If the variable costs per unit are $9, total fixed costs must be:

Answer 1

Answer:

$175,400

Explanation:

Data provided :

Number of units to sell by the firm = 26,300 units

selling price of the product = $18 per unit

Variable cost of the product = $9 per unit

Predicted Pretax income = $61,300

Now,

the contribution margin per unit = Selling price per unit - variable cost per unit

or

contribution margin per unit = $18 - $9 = $9

Now,

for all the units to sell, the total contribution margin will be = 26,300 × $9

= $236,700

Therefore,

the total fixed costs = Contribution margin - pretax income

= $236,700 - $61,300

= $175,400