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Dear sir,
I can not understand this question, would you please help me?
A company has a single prouduct with a selling price of $12 per unit, which is caculated as variable cost per unit, plus 20%. At an output level of 5000 units, it makes a loss of $8000.
What is the company’s total fixed cost ?If the selling price is variable cost + 20%, the the selling price must be 120% x variable cost.
So the variable cost per unit must be $12 / 1.2 = $10.So…the contribution is 12 – 10 = $2 per unit.
If they sell 5000 units, then the total contribution must be 5000 x $2 = $10,000.
If they make a loss of $8000 then the total fixed cost must be $18,000.
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