Question

ABC manufacturing co has estimated breakeven volume of 50,000 units for its new widget. If $unit variable cost is $23.00 and unit selling price is $25.00, what is the total fixed cost?

Answer 1

Answer:

$100,000

Explanation:

Data provided

Break-even volume = 50,000 units

Variable cost = $23.00

Unit selling price = $25.00

The computation of fixed cost is shown below:-

Contribution margin per unit = Selling price per unit - Variable expense per unit

= ($25 - $23)

= $2

Break even point = Fixed cost ÷ Contribution margin per unit

Fixed cost = Break even point × Contribution margin per unit

= 50,000 × 2

= $100,000