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Question on Fixed Cost

This topic has 2 replies, 2 voices, and was last updated 12 years ago by kathleen.

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May 8, 2012 at 12:55 pm #52551
kathleen
Participant
- Topics: 5
- Replies: 4
Hi there I am posting a question of fixed cost for everyone to give there input
Question: A company has a single product with a selling price of $12 per unit which is calculated as variable cost per unit plus 20%. At an output of 5000 units it makes a loss of $8000.00
What is the company’s fixed cost.
REMEMBER: Fixed Costs= Contribution – Profit
May 8, 2012 at 10:44 pm #97267
Vipin
Member
- Topics: 151
- Replies: 374
contribution=12*20%*5,000=12,000
fixed cost=contribution-profit=12,000-(-8,000)=20,000.ans
May 10, 2012 at 4:22 pm #97268
kathleen
Participant
- Topics: 5
- Replies: 4
Your answer is incorrect the ans should be $18000.00
Solution
Variable Cost = You already have 100+20=120
Therefore your variable cost is 120/12=10
Contribution = selling price – variable costs
= 12-10=2
fixed cost = contribution -profit
(5000×2)- (-8000)
10000+8000
18000
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