For each total fixed cost listed below, determine the fixed cost per unit when sales are 25, 50, and 100 units. Store rent $4,000 Manager's salary 500 Equipment lease 375 Depreciation on fixtures 250 Begin by calculating the fixed cost per unit for each of the fixed costs listed, and the total fixed cost per unit when sales are 25 units. Then calculate the fixed cost per unit and the total fixed cost per unit when sales are 50 and 100 units, respectively. (Round all amounts to the nearest cent.) Fixed Cost per Total Fixed Cost Unit at 25 Units Store rent $4,000 Manager's salary 500 Equipment lease 375 Depreciation on fixtures 250 Total fixed cost per unit
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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Store rent
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$4,000
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Manager's salary
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500
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Equipment lease
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375
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250
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Fixed Cost per
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Total Fixed Cost
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Unit at 25 Units
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Store rent
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$4,000
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Manager's salary
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500
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Equipment lease
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375
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Depreciation on fixtures
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250
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Total fixed cost per unit
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