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Chapter 10 Example 2

AAmbitiousMe14y ago
Hi John

It says in the question that 'fixed overheads to increase by $140,000 per year'. Does this not mean that FOH in year 1 will be $140,000, in year 2 $280,000, in year 3 $420,000 and so on.

In your lecture you kept these at $140,000 for all four years.

It does not make sense to me as it does not say in the question that fixed overheads are to remain $140,000 per year.
John MoffatJohn MoffatTutor14y ago#1
No - if it was to increase as you say, then the question would state that in increased by 140,000 this year and in every subsequent year.

If your salary is currently 10,000 per year, and your boss tells you it will be increased by 1,000 per year then you would expect it to be 11,000 per year until he told you differently.
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