ABC's Product information
Current Product Expansion Product (estimate)
Selling Price $14.50 $
Units produced and expected to be sold 80,000 5,000
Machine Hours 40,000 5,000
Direct Materials $1.30 per unit $5.60 per unit
Direct labor dollars needed per product $2.80 per unit $4.00 per unit
Variable Factory Overhead $1.00 per Machine Hour $1.00 per Machine Hour
Variable Selling Expense $0.20 per unit $0.20 per unit
Total Fixed Costs:
Fixed Factory Overhead $198,000
Fixed Selling expenses $ 191,250
To determine the total fixed costs for ABC's current product and expansion product, you need to add the fixed factory overhead and fixed selling expenses.
For the current product:
Fixed Factory Overhead: $198,000
Fixed Selling Expenses: $191,250
Total Fixed Costs for the Current Product = Fixed Factory Overhead + Fixed Selling Expenses
= $198,000 + $191,250
= $389,250
For the expansion product (estimate):
Fixed Factory Overhead: $198,000
Fixed Selling Expenses: $191,250
Total Fixed Costs for the Expansion Product = Fixed Factory Overhead + Fixed Selling Expenses
= $198,000 + $191,250
= $389,250
Therefore, the total fixed costs for both the current product and expansion product are $389,250.
To calculate the total fixed costs for ABC's current product, you would add the Fixed Factory Overhead and Fixed Selling expenses:
Total Fixed Costs for Current Product = Fixed Factory Overhead + Fixed Selling expenses
= $198,000 + $191,250
= $389,250
For the expansion product, if the fixed costs remain the same as the current product, then the total fixed costs for the expansion product would also be $389,250.