Question

You have been provided with the following information

Answer 1

Answer:

$15000.

Explanation:

Given: Sales $90,000

Less Variable Exp (54,000)

Contribution margin 36,000

Less Fixed Exp (24,000)

Operating Profit $12,000

As sales decreases by 10%.

∴ Sales= $Current\ sales- (current\ sales \times 10%)$

Sales= $\ 90000- (\ 90000 \times \frac{10}{100} )$

Solving and opening the parenthesis.

Sales= $\ 90000- \ 9000= \ 81000$

Sales= $81000.

Now, computing to get fixed expense at which operating profit will remain same.

Contribution margin= sales- variable expense

⇒ Contribution margin= $\ 81000-\ 54000= \ 27000$

Fixed expense= Contribution margin - operating profit

$Fixed\ expense= \ 27000-\ 12000= \ 15000$

∴ Fixed expense will $ 15000 at which operating profit will remain same.