Variable cost and fixed costs: Variable costs: The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well. Fixed costs: The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally. To compute: The expected − Variable cost Fixed cost For the expected units to be sold next year

Question

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Answer 1

Question

Chapter 21, Problem 15E

To determine

Concept Introduction:

Variable cost and fixed costs:

Variable costs: The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well.

Fixed costs: The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally.

To compute:

The expected −

Variable cost

Fixed cost
For the expected units to be sold next year

Expert Solution & Answer

Answer to Problem 15E

Solution:

The expected −

Variable cost for the expected units to be sold next year = $ 12,000,000
Fixed cost for the expected units to be sold next year = $ 3,750,000

Explanation of Solution

The expected variable costs and fixed costs are calculated as under −

Variable cost for the expected units to be sold next year -

Given,

The expected total sales revenue = $ 17,000,000
Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000

The sales price per unit will be calculated as under −

Sales price per unit =Expected sales revenueExpected units to be soldSales price per unit =$17,000,000200,000 units Sales price per unit =$ 85 per unit

The expected sales price per unit = $ 85.
Now, variable cost per unit will be calculated as under −

Variable cost per unit = Sales price per unit – Contribution margin per unitVariable cost per unit = $ 85 − $ 25Variable cost per unit = $ 60 per unit

The total expected variable costs are calculated as under −

Total variable cost = Variable cost per unit X Expected units to be soldTotal variable cost = $ 60 per unit X 200,000 unitsTotal variable cost = $12,000,000

The total expected variable costs = $ 12,000,000.
2 Fixed cost for the expected units to be sold next year −

The total expected fixed costs will be calculated as under −
Given,

Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000
Total expected variable costs = $ 12,000,000

First, total contribution margin will be calculated as −
Total contribution margin = Contribution margin per unit X Expected units to be soldTotal contribution margin = $ 25 per unit X 200,000 unitsTotal contribution margin = $ 5,000,000

Now, fixed costs will be calculated as −
Fixed costs = Total contribution margin−Expected Pre−tax income for the next yearFixed costs = $ 5,000,000−$1,250,000Fixed costs = $ 3,750,000

The expected fixed costs for the next year = $ 3,750,000

Conclusion

Thus, the expected fixed costs and expected variable costs have been calculated for the next year.

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Answer 2

Question

Chapter 21, Problem 15E

To determine

Concept Introduction:

Variable cost and fixed costs:

Variable costs: The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well.

Fixed costs: The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally.

To compute:

The expected −

Variable cost

Fixed cost
For the expected units to be sold next year

Expert Solution & Answer

Answer to Problem 15E

Solution:

The expected −

Variable cost for the expected units to be sold next year = $ 12,000,000
Fixed cost for the expected units to be sold next year = $ 3,750,000

Explanation of Solution

The expected variable costs and fixed costs are calculated as under −

Variable cost for the expected units to be sold next year -

Given,

The expected total sales revenue = $ 17,000,000
Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000

The sales price per unit will be calculated as under −

Sales price per unit =Expected sales revenueExpected units to be soldSales price per unit =$17,000,000200,000 units Sales price per unit =$ 85 per unit

The expected sales price per unit = $ 85.
Now, variable cost per unit will be calculated as under −

Variable cost per unit = Sales price per unit – Contribution margin per unitVariable cost per unit = $ 85 − $ 25Variable cost per unit = $ 60 per unit

The total expected variable costs are calculated as under −

Total variable cost = Variable cost per unit X Expected units to be soldTotal variable cost = $ 60 per unit X 200,000 unitsTotal variable cost = $12,000,000

The total expected variable costs = $ 12,000,000.
2 Fixed cost for the expected units to be sold next year −

The total expected fixed costs will be calculated as under −
Given,

Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000
Total expected variable costs = $ 12,000,000

First, total contribution margin will be calculated as −
Total contribution margin = Contribution margin per unit X Expected units to be soldTotal contribution margin = $ 25 per unit X 200,000 unitsTotal contribution margin = $ 5,000,000

Now, fixed costs will be calculated as −
Fixed costs = Total contribution margin−Expected Pre−tax income for the next yearFixed costs = $ 5,000,000−$1,250,000Fixed costs = $ 3,750,000

The expected fixed costs for the next year = $ 3,750,000

Conclusion

Thus, the expected fixed costs and expected variable costs have been calculated for the next year.

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Answer 3

Question

Chapter 21, Problem 15E

To determine

Concept Introduction:

Variable cost and fixed costs:

Variable costs: The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well.

Fixed costs: The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally.

To compute:

The expected −

Variable cost

Fixed cost
For the expected units to be sold next year

Expert Solution & Answer

Answer to Problem 15E

Solution:

The expected −

Variable cost for the expected units to be sold next year = $ 12,000,000
Fixed cost for the expected units to be sold next year = $ 3,750,000

Explanation of Solution

The expected variable costs and fixed costs are calculated as under −

Variable cost for the expected units to be sold next year -

Given,

The expected total sales revenue = $ 17,000,000
Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000

The sales price per unit will be calculated as under −

Sales price per unit =Expected sales revenueExpected units to be soldSales price per unit =$17,000,000200,000 units Sales price per unit =$ 85 per unit

The expected sales price per unit = $ 85.
Now, variable cost per unit will be calculated as under −

Variable cost per unit = Sales price per unit – Contribution margin per unitVariable cost per unit = $ 85 − $ 25Variable cost per unit = $ 60 per unit

The total expected variable costs are calculated as under −

Total variable cost = Variable cost per unit X Expected units to be soldTotal variable cost = $ 60 per unit X 200,000 unitsTotal variable cost = $12,000,000

The total expected variable costs = $ 12,000,000.
2 Fixed cost for the expected units to be sold next year −

The total expected fixed costs will be calculated as under −
Given,

Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000
Total expected variable costs = $ 12,000,000

First, total contribution margin will be calculated as −
Total contribution margin = Contribution margin per unit X Expected units to be soldTotal contribution margin = $ 25 per unit X 200,000 unitsTotal contribution margin = $ 5,000,000

Now, fixed costs will be calculated as −
Fixed costs = Total contribution margin−Expected Pre−tax income for the next yearFixed costs = $ 5,000,000−$1,250,000Fixed costs = $ 3,750,000

The expected fixed costs for the next year = $ 3,750,000

Conclusion

Thus, the expected fixed costs and expected variable costs have been calculated for the next year.

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Answer 4

Question

Chapter 21, Problem 15E

To determine

Concept Introduction:

Variable cost and fixed costs:

Variable costs: The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well.

Fixed costs: The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally.

To compute:

The expected −

Variable cost

Fixed cost
For the expected units to be sold next year

Expert Solution & Answer

Answer to Problem 15E

Solution:

The expected −

Variable cost for the expected units to be sold next year = $ 12,000,000
Fixed cost for the expected units to be sold next year = $ 3,750,000

Explanation of Solution

The expected variable costs and fixed costs are calculated as under −

Variable cost for the expected units to be sold next year -

Given,

The expected total sales revenue = $ 17,000,000
Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000

The sales price per unit will be calculated as under −

Sales price per unit =Expected sales revenueExpected units to be soldSales price per unit =$17,000,000200,000 units Sales price per unit =$ 85 per unit

The expected sales price per unit = $ 85.
Now, variable cost per unit will be calculated as under −

Variable cost per unit = Sales price per unit – Contribution margin per unitVariable cost per unit = $ 85 − $ 25Variable cost per unit = $ 60 per unit

The total expected variable costs are calculated as under −

Total variable cost = Variable cost per unit X Expected units to be soldTotal variable cost = $ 60 per unit X 200,000 unitsTotal variable cost = $12,000,000

The total expected variable costs = $ 12,000,000.
2 Fixed cost for the expected units to be sold next year −

The total expected fixed costs will be calculated as under −
Given,

Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000
Total expected variable costs = $ 12,000,000

First, total contribution margin will be calculated as −
Total contribution margin = Contribution margin per unit X Expected units to be soldTotal contribution margin = $ 25 per unit X 200,000 unitsTotal contribution margin = $ 5,000,000

Now, fixed costs will be calculated as −
Fixed costs = Total contribution margin−Expected Pre−tax income for the next yearFixed costs = $ 5,000,000−$1,250,000Fixed costs = $ 3,750,000

The expected fixed costs for the next year = $ 3,750,000

Conclusion

Thus, the expected fixed costs and expected variable costs have been calculated for the next year.

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Answer 5

Chapter 21, Problem 15E

To determine

Concept Introduction:

Variable cost and fixed costs:

Variable costs: The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well.

Fixed costs: The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally.

To compute:

The expected −

Variable cost

Fixed cost
For the expected units to be sold next year

Expert Solution & Answer

Answer to Problem 15E

Solution:

The expected −

Variable cost for the expected units to be sold next year = $ 12,000,000
Fixed cost for the expected units to be sold next year = $ 3,750,000

Explanation of Solution

The expected variable costs and fixed costs are calculated as under −

Variable cost for the expected units to be sold next year -

Given,

The expected total sales revenue = $ 17,000,000
Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000

The sales price per unit will be calculated as under −

Sales price per unit =Expected sales revenueExpected units to be soldSales price per unit =$17,000,000200,000 units Sales price per unit =$ 85 per unit

The expected sales price per unit = $ 85.
Now, variable cost per unit will be calculated as under −

Variable cost per unit = Sales price per unit – Contribution margin per unitVariable cost per unit = $ 85 − $ 25Variable cost per unit = $ 60 per unit

The total expected variable costs are calculated as under −

Total variable cost = Variable cost per unit X Expected units to be soldTotal variable cost = $ 60 per unit X 200,000 unitsTotal variable cost = $12,000,000

The total expected variable costs = $ 12,000,000.
2 Fixed cost for the expected units to be sold next year −

The total expected fixed costs will be calculated as under −
Given,

Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000
Total expected variable costs = $ 12,000,000

First, total contribution margin will be calculated as −
Total contribution margin = Contribution margin per unit X Expected units to be soldTotal contribution margin = $ 25 per unit X 200,000 unitsTotal contribution margin = $ 5,000,000

Now, fixed costs will be calculated as −
Fixed costs = Total contribution margin−Expected Pre−tax income for the next yearFixed costs = $ 5,000,000−$1,250,000Fixed costs = $ 3,750,000

The expected fixed costs for the next year = $ 3,750,000

Conclusion

Thus, the expected fixed costs and expected variable costs have been calculated for the next year.

Answer 6

Chapter 21, Problem 15E

To determine

Concept Introduction:

Variable cost and fixed costs:

Variable costs: The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well.

Fixed costs: The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally.

To compute:

The expected −

Variable cost

Fixed cost
For the expected units to be sold next year

Expert Solution & Answer

Answer to Problem 15E

Solution:

The expected −

Variable cost for the expected units to be sold next year = $ 12,000,000
Fixed cost for the expected units to be sold next year = $ 3,750,000

Explanation of Solution

The expected variable costs and fixed costs are calculated as under −

Variable cost for the expected units to be sold next year -

Given,

The expected total sales revenue = $ 17,000,000
Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000

The sales price per unit will be calculated as under −

Sales price per unit =Expected sales revenueExpected units to be soldSales price per unit =$17,000,000200,000 units Sales price per unit =$ 85 per unit

The expected sales price per unit = $ 85.
Now, variable cost per unit will be calculated as under −

Variable cost per unit = Sales price per unit – Contribution margin per unitVariable cost per unit = $ 85 − $ 25Variable cost per unit = $ 60 per unit

The total expected variable costs are calculated as under −

Total variable cost = Variable cost per unit X Expected units to be soldTotal variable cost = $ 60 per unit X 200,000 unitsTotal variable cost = $12,000,000

The total expected variable costs = $ 12,000,000.
2 Fixed cost for the expected units to be sold next year −

The total expected fixed costs will be calculated as under −
Given,

Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000
Total expected variable costs = $ 12,000,000

First, total contribution margin will be calculated as −
Total contribution margin = Contribution margin per unit X Expected units to be soldTotal contribution margin = $ 25 per unit X 200,000 unitsTotal contribution margin = $ 5,000,000

Now, fixed costs will be calculated as −
Fixed costs = Total contribution margin−Expected Pre−tax income for the next yearFixed costs = $ 5,000,000−$1,250,000Fixed costs = $ 3,750,000

The expected fixed costs for the next year = $ 3,750,000

Conclusion

Thus, the expected fixed costs and expected variable costs have been calculated for the next year.

Answer 7

Chapter 21, Problem 15E

To determine

Concept Introduction:

Variable cost and fixed costs:

Variable costs: The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well.

Fixed costs: The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally.

To compute:

The expected −

Variable cost

Fixed cost
For the expected units to be sold next year

Answer 8

Expert Solution & Answer

Answer to Problem 15E

Solution:

The expected −

Variable cost for the expected units to be sold next year = $ 12,000,000
Fixed cost for the expected units to be sold next year = $ 3,750,000

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The expected variable costs and fixed costs are calculated as under −

Variable cost for the expected units to be sold next year -

Given,

The expected total sales revenue = $ 17,000,000
Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000

The sales price per unit will be calculated as under −

Sales price per unit =Expected sales revenueExpected units to be soldSales price per unit =$17,000,000200,000 units Sales price per unit =$ 85 per unit

The expected sales price per unit = $ 85.
Now, variable cost per unit will be calculated as under −

Variable cost per unit = Sales price per unit – Contribution margin per unitVariable cost per unit = $ 85 − $ 25Variable cost per unit = $ 60 per unit

The total expected variable costs are calculated as under −

Total variable cost = Variable cost per unit X Expected units to be soldTotal variable cost = $ 60 per unit X 200,000 unitsTotal variable cost = $12,000,000

The total expected variable costs = $ 12,000,000.
2 Fixed cost for the expected units to be sold next year −

The total expected fixed costs will be calculated as under −
Given,

Expected units to be sold = 200,000 units
Contribution margin per unit = $ 25 per unit
Expected Pre-tax income for the next year = $ 1,250,000
Total expected variable costs = $ 12,000,000

First, total contribution margin will be calculated as −
Total contribution margin = Contribution margin per unit X Expected units to be soldTotal contribution margin = $ 25 per unit X 200,000 unitsTotal contribution margin = $ 5,000,000

Now, fixed costs will be calculated as −
Fixed costs = Total contribution margin−Expected Pre−tax income for the next yearFixed costs = $ 5,000,000−$1,250,000Fixed costs = $ 3,750,000