A firm expects to sell 26,100 units of its product at $14 per unit. Pretax income is predicted to be $61,100. If the variable costs per unit are $7, total fixed costs must be:

a. $304,300.

b. $365,400.

c. $95,500.

d. $121,600.

e. $182,700.

Answer: $121,600

Explanation:

Given the following;

Number of units = 26,100

Cost per unit = $14

Pretax income = $61,100

Variable cost = $7

Pretax income represents an organization's profif after deducting all operating expenses before except income tax.

Total revenue from sales = $14 * 26,100 = $365,400

If Total revenue from sales = $365,400

and profit accrued after deducting operating expenses = $61,100.

cost of production can be found by;

Total revenue from sales - Pretax income

$365,400 - #61,100 = $304,300

Total cost = $304,300

Using the formula:

Total cost = variable cost + fixed cost

Variable cost = $7 * 26,100 = $182,700

Fixed cost = $304,300 - $182,700 = $121,600

d. $121,600

Explanation:

The total sales revenue = 26100 * 14 = $365400

Out of this revenue figure, 61100 is the profit figure which means the total costs are 365400 - 61100 = $304,300

The variable costs amount to = 7 * 26100 = $182700

As we know that the total cost is made up of both fixed and variable costs, the fixed costs will then be,

Fixed cost = Total cost - Variable cost

Fixed Cost = 304300 - 182700 = $121,600