Question

A project has earnings before interest and taxes of $14,600, fixed costs of $52,000, a selling price of $29 a unit, and a sales quantity of 16,000 units. All estimates are accurate within a plus/minus range of 3 percent. Depreciation is $12,000. What is the base case variable cost per unit?

Answer 1

Answer:

$24.09

Explanation:

[Sales units quantity × (Selling price per unit - Variable cost per unit)] - Fixed costs - Depreciation = Earning before interest and taxes

Sales units quantity 16,000

Selling price per unit $29

Fixed costs $52,000

Depreciation $12,000

Earning before interest and taxes $14,600

Variable cost per unit ?

[16,000 × ($29 - Variable cost per unit )] - $52,000 - $12,000 = $14,600

$29 - Variable cost per unit = ($14,600 + $52,000 + $12,000)/16000

Variable cost per unit = $29 - $4.91

Variable cost per unit = $24.09