Determine the total fixed costs and total variable costs

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Reference no: EM131769952

Problem – Break-even sales under present and proposed conditions:

French Broad Inc., operating at full capacity, sold 25,125 units at a price of $75 per unit during 2008. Its income statement for 2008 is as follows:

Sales

 

$1,884,375

Cost of goods sold

 

1,100,000

Gross profit

 

$784,375

Expenses:

 

 

Selling expenses

$125,000

 

Administrative expenses

125,000

 

Total expenses

 

$250,000

Income from operations

 

$534,375

The division of costs between fixed and variable is as follows:

 

Fixed

Variable

Cost of sales

40%

60%

Selling expenses

50%

50%

Administrative expenses

75%

25%

Management is considering a plant expansion program that will permit an increase of $487,500 in yearly sales. The expansion will increase fixed costs by $135,000, but will not affect the relationship between sales and variable costs.

Required –

1. Determine for 2008 the total fixed costs and total variable costs.

2. Determine for 2008 the unit variable cost and the unit contribution margin.

Reference no: EM131769952

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