Question

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $5, total fixed costs must be: Group of answer choices $125,000. $90,000. $215,000. $65,000. $275,000.

Answer 1

$90,000

Step-by-step explanation:

The computation of the total fixed cost is shown below:

Sales $275,000 (25,000 units × $11 per unit)

Less: Variable cost $125,000 (25,000 units × $5 per unit)

Contribution margin $150,000

Less: Pre tax income $60,000

Total fixed cost $90,000

We simply find out the contribution margin and then subtract it from it so that the total fixed cost could come