Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of
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A firm expects to sell 25,500 units of its product at $16 per unit. pretax income is predicted to be $60,500. If variable costs are $8 per unit, total fixed costs must be $143,500.
Fixed costs are costs that stay constant no matter changes in production volume, implying that irrespective of whether output rises or decreases, total fixed costs remain constant within the relevant range.
Rent, labor, depreciation, insurance, and other fixed costs per unit fluctuate over the relevant range, on the contrary.
Given,
Selling price = $16
Variable cost per unit = $8
Units sold = 25,500
Pretax income = $60,500
Substituting the provided information into the above calculation yields,
Contribution margin =
= $204,000
Formula:
This symbolizes,
Substituting the provided information into the above calculation yields,
= $143,500
Hence, the answer is $143,500.
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