What is a fixed cost? Give an example.
Fixed costs are the costs that persistent consistency in total amount.
The cost that is not function of any other variable is called fixed costs, therefore this cost show persistent consistency even after change in volume of production.
Analyzing a cost-volume-profit graph
Nolan Rouse is considering starting a Web-based educational business, e-Prep MBA. He plans to offer a short-course review of accounting for students entering MBA programs. The materials would be available on a password-protected Web site; students would complete the course through self-study. Rouse would have to grade the course assignments, but most of the work would be in developing the course materials, setting up the site, and marketing. Unfortunately, Rouse’s hard drive crashed before he finished his financial analysis. However, he did recover the following partial CVP chart:
1. Label each axis, the sales revenue line, the total costs line, the fixed costs line, the operating income area, and the breakeven point.
2. If Rouse attracts 300 students to take the course, will the venture be profitable? Explain your answer.
3. What are the breakeven sales in students and dollars?
Use the following information to complete Short Exercises S20-10 through S20-15.
Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at $70 per person as a one-day entrance fee. Variable costs are $42 per person, and fixed costs are $170,800 per month.
Refer to the original information (ignoring the changes considered in Short Exercise S20-12). Suppose Funday Park increases fixed costs from $170,800 per month to $231,000 per month. Compute the new breakeven point in tickets and in sales dollars.
94% of StudySmarter users get better grades.Sign up for free