Kearney Company, operating at full capacity, sold 400,000 units at a price of $246.60 per unit during 20Y5. Its income statement for 20Y5 is as follows:

Sales $ 98,640,000

Cost of goods sold (44,500,000)

Gross profit $ 54,140,000

Expenses:

Selling expenses $8,000,000

Administrative expenses 3,000,000

Total expenses (11,000,000)

Income from operations $ 43,140,000

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

Fixed Variable

Cost of good sold 28% 72%

Selling expenses 25% 75%

Administrative expenses 80% 20%

Management is considering a plant expansion program that will permit an increase of $8,631,000 (35,000 units at $246.60) in yearly sales. The expansion will increase fixed costs by $3,600,000 but will not affect the relationship between sales and variable costs.

Determine for 20Y5 the total fixed costs and the total variable costs.

Question

Business

Smiley

26 October, 03:51

Kearney Company, operating at full capacity, sold 400,000 units at a price of $246.60 per unit during 20Y5. Its income statement for 20Y5 is as follows:

Sales $ 98,640,000

Cost of goods sold (44,500,000)

Gross profit $ 54,140,000

Expenses:

Selling expenses $8,000,000

Administrative expenses 3,000,000

Total expenses (11,000,000)

Income from operations $ 43,140,000

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

Fixed Variable

Cost of good sold 28% 72%

Selling expenses 25% 75%

Administrative expenses 80% 20%

Management is considering a plant expansion program that will permit an increase of $8,631,000 (35,000 units at $246.60) in yearly sales. The expansion will increase fixed costs by $3,600,000 but will not affect the relationship between sales and variable costs.

Determine for 20Y5 the total fixed costs and the total variable costs.

+1

Answers (1)

Know the Answer?

Lizeth Chapman · Answer 1

Total fixed costs = $16,860,000

Total variable costs = $38,640,000

Explanation:

The computation of Total fixed cost and total variable cost is shown below:-

Total fixed costs = Cost of goods sold + Selling expense + Administrative expense

= (28% * $44,500,000) + (25% * $8,000,000) + (80% * $3,000,000)

= $12,460,000 + $2,000,000 + $2,400,000

= $16,860,000

Total variable costs = Cost of goods sold + Selling expense + Administrative expense

= (72% * $44,500,000) + (75% * $8,000,000) + (20% * $3,000,000)

= $32,040,000 + $6,000,000 + $600,000

= $38,640,000