Question

Betty is helping her company consider a change in its CVP relationship to increase profitability. Currently, the company is selling 14,100 units, generating $76,600 in operating income. The contribution margin is $22 per unit, while total variable costs are $2.53,800. What amount of foced costs does the company currently incur?

Answer 1

The company currently incurs a negative fixed cost of $233,600.

Step-by-step explanation:

To calculate the fixed costs, we can use the formula:

Fixed Costs = Operating Income - (Contribution Margin * Number of Units)

Substituting the given values:

Fixed Costs = $76,600 - ($22 * 14,100) = $76,600 - $310,200 = -$233,600

Therefore, the company currently incurs a negative fixed cost of $233,600.