Anyone know accounting?!

Question

Cooper Company expects to sell 200,000 units of its product next year, which would generate total sales of $17 million. Management predicts that pretax net income for next year will be $1,250,000 and that the contribution margin per unit will be $25.

What is the total expected fixed cost and variable cost?

Answer 1

Wow, that's hard. I would suggest asking someone in the class, rather than on here...there are probably a higher concentration of smart people in your class. lol

Good luck...sorry I'm no help

Answer 2

Dani

If turnover = $17m and pre-tax net income = $1.25m, then total cost must be 17-1.25 = $15.75m

To find out how much of that is variable cost:

Revenue per unit = $17m / 200,000 = $85

Because contribution per unit = $25, variable cost per unit must be 85-25 = $60

So total variable cost will be $60 x 200,000 = $12m

Total cost = fixed cost + variable cost

So Fixed cost = Total cost - variable cost

Fixed cost = $15.75m - $12m = $3.75m

I hope this is right, and gives you what you need.

Tom