Afirm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $5, total fixed costs must be: A. $65,000. B. $900,000. C. $125,000. D. $215,000. E. $275,000.

Answer: $110,000

Explanation:

Given the following;

Projected unit sale = 25,000

Cost per unit = $11

Projected Pretax income = $60,000

Variable cost per unit = $5

Total fixed cost = ?

Pretax income is the earning accrued by a business after deduction all expenses except tax fees.

Pretax income can be calculated using the relation;

Pretax income = (Total contribution margin - fixed cost)

Total contribution margin = (Total cost per unit - Total variable cost)

Cost per unit total = 25000 * $11 = $275,000

Total variable cost = 25000 * $5 = $125,000

Total contribution margin = $275,000 - $125,000 = $170,000

Pretax income = total contribution margin - fixed cost

$60,000 = $ (170,000 - total fixed cost)

Total fixed cost = $170,000 - $60,000 = $110,000

total fixed cost = 90,000

Explanation:

Giving the following information:

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. The variable costs per unit are $5.

The pretax income is calculated using the following formula:

Pretax income = total contribution margin - total fixed cost

60,000 = 25,000 * (11 - 5) - total fixed cost

60,000 - 150,000 = - total fixed cost

total fixed cost = 90,000