Question

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $5, total fixed costs must be:

Answer 1

Answer:

$90,000

Explanation:

Income = Contribution - Fixed Costs

hence,

Fixed Costs = Contribution - Income

therefore

Fixed Costs = (25,000 x $6) - $60,000

                    = $150,000 - $60,000

                    = $90,000

thus,

total fixed costs must be $90,000.