a firm expects to sell 25000 units of its products at $11.00 p/unit. pretax income is predicted to be $60,000. if the variable cost p/unit are $5.00, total fixed cost must be?
To calculate the total fixed cost, we need to use the formula for calculating the pretax income of a firm:
Pretax Income = (Selling Price * Number of Units) - (Variable Cost * Number of Units) - Total Fixed Cost
We have the following information:
- Selling Price = $11.00 per unit
- Number of Units = 25,000
- Variable Cost per Unit = $5.00
- Pretax Income = $60,000
By substituting these values into the formula, we can solve for the total fixed cost:
$60,000 = ($11.00 * 25,000) - ($5.00 * 25,000) - Total Fixed Cost
Let's simplify the equation:
$60,000 = $275,000 - $125,000 - Total Fixed Cost
To solve for the total fixed cost, rearrange the equation:
Total Fixed Cost = $275,000 - $125,000 - $60,000
Perform the calculations:
Total Fixed Cost = $275,000 - $125,000 - $60,000
Total Fixed Cost = $90,000
Therefore, the total fixed cost for the firm is $90,000.