Question

5. Facility rent is $2,000 per month, accounting services cost $2,600 per month, insurance is $1,100 per month, and utilities such as phone and electricity cost $550 per month. The manager is paid $89,000 per year, gets benefits worth $6,500 per year, and the Social Security contribution is 7.65 percent. Given this information, what is the amount of annual fixed expense that this company has to pay? 6. Given the information in problem 5, if the profit contribution after variable expenses is $125 per unit, is the firm making a profit if it produces and sells 1,000 units per year? (Explain) 7. If a firm's total material cost increases by $150,000 when the level of production increases by 7,500 units, what is the variable cost on a per unit basis?

Answer 1

case A

Fixed Expense $

facility rent ($2000*12) = 24000

insurance ($1100*12) = 13200

eletricity cost ($550*12) = 6600

manager salary = 89000

benifits to manager cost    = 6500

social security to manager

($89000*7.5%) = 6675

  annual fixed cost    145975

assume social security cost for manager pay 7.5 percetage on his salary so its treated as fixed cost  

case B

$

contribution after variable cost ($125*1000) =125000

less; fixedd cost = 145975

Loss for the year 20975

case C

contribution before increase meterial cost($7500*125) 937500

less: incresed meterial cost 150000

contribution 787500

less : fixed cost 145975

profit for the year 641525