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Tom [10]
4 years ago
13

A company is considering a project with a cash break-even point of 22,600 units. The selling price is $28 a unit, the variable c

ost per unit is $13, and depreciation is $14,000. What is the projected amount of fixed costs
Business
1 answer:
Ludmilka [50]4 years ago
4 0

Answer:

fixed Cost 39,000

Explanation:

<u>The break even point is the level of sales at which net income equal to zero.</u>

This means the company operates and pays their fixed and variable cost

<u>The formula for break even point in units is:</u>

BEP_{units} = \frac{Fixed \: cost}{Contribution \: per \: units}

<u>Where:</u>

Contribution per unit = Selling price - variable cost

<em>15 per unit           =  28 - 13 </em>

<em />

We are given the BEP and we need to solve for Fixed cost

22,600 = \frac{Fixed \: cost}{15}

Fixed Cost = 22,600 x 15 = 39,000

The depreciation expense is irrelevant for the case, we can solve for the total fixed cost directly by using the BEP

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