Google Answers Logo
View Question
Q: Math question ( Answered 5 out of 5 stars,   0 Comments )
Subject: Math question
Category: Business and Money > Finance
Asked by: carlad22-ga
List Price: $5.00
Posted: 19 Jun 2005 16:41 PDT
Expires: 19 Jul 2005 16:41 PDT
Question ID: 534915
Therapeutic Systems sells its products for $8 per unit. It has the following costs:

Rent $120,000
Factory labor $1.50 per unit
Executive salaries $112,000
Raw material $.70 per unit

Separate the expenses between fixed and variable costs per unit. Using
this information and the sales price per unit of $6, compute the
break-even point.
Subject: Re: Math question
Answered By: livioflores-ga on 19 Jun 2005 17:58 PDT
Rated:5 out of 5 stars
Hi again!!

"Definition of Fixed Costs: In production, fixed costs are the costs
that do not vary with the number of goods produced. In the short-run
factors like land and rent are fixed costs, whereas raw materials used
in production are not."
From "Fixed Costs - Glossary - Dictionary Definition of Fixed Costs":

"Variable costs are costs that vary directly with the number of
products produced. For instance, the cost of the materials needed and
the labour used to produce units isn't always the same."
From "Breakeven Analysis - Fixed Costs Variable Costs":

According to the above definitions we have that:

Fixed costs are:
Rent $120,000
Executive salaries $112,000

Variable costs are:
Factory labor $1.50 per unit
Raw material $0.70 per unit

Break-even = Fixed Costs / Contribution margin per unit 

Contribution margin per unit = (Revenues - Variable Costs) / Units sold =
                             = Price per unit - Variable cost per unit

Break-even = Fixed Costs / (Price per unit - Variable cost per unit) =
           = ($120,000 + $112,000) / [$6.00 - ($1.50 + $0.70)] =
           = $232,000 / $3.80 =
           = 61053 units

I hope that this helps you. Feel free to request for a clarification
if you need it.

carlad22-ga rated this answer:5 out of 5 stars
This is more than I bargained for. I really appreciate the
explaination of the terms. I did not expect all of that. Thanks

There are no comments at this time.

Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice. Google does not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service or service provider mentioned or any opinion expressed in answers or comments. Please read carefully the Google Answers Terms of Service.

If you feel that you have found inappropriate content, please let us know by emailing us at with the question ID listed above. Thank you.
Search Google Answers for
Google Answers  

Google Home - Answers FAQ - Terms of Service - Privacy Policy