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

Hamza Salas

Business

17 December, 09:39

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.

+3

Answers (1)

Know the Answer?

Claire Lawrence · 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