Fixed Cost Assignment

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Fixed Cost Assignment

By | September 2012
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Fixed Cost Assignment
1.10.1
Month / Meals Served / Total Costs
July / 3,500 / $20,500
August / 4,000 / 22,600
September / 4,200 / 23,350
October / 4,600 / 24,500
November / 4,700 / 25,000
December / 4,900 / 26,000
In our text, the examples for the Break Even Point are demonstrated by steps. Step one is subtracting the high and the low of services in the program (4,900 – 3,500 = 1,400 services). Step two would then be to subtract the high and low cost (26,000 – 20,500 = $5,500). Step three is the variable cost for one meal each. I have to divide the cost by the services (5,500 / 1,400 = $3.928 or $3.93). In step four, the variable low cost is found by multiplying services of program by how much it cost per service (3,500 * 3.93 = 13,855). To find the variable high cost I have to multiply (4,900 * 3.93 = 19,257). Step five, the fixed cost is subtracting the low cost from the variable low cost (20,500 – 13,855 = 11645). To find the fixed high cost (26,000 – 19,257 = 6,743). The final step is step six. The Break Even Point formula or BEP is 5.77x (what would be earned) + 11645 + 3.93 = 1.84 to leave the Break Even Point at 6,330. The program needs to provide (6,229 * 12 = 74,748). The difference of 74,748 – 45,000 = 29,748. The subtracted total makes a profit of 29,748 * 1.84 = 5,474. 2.10.2

The annual salary of the part-time newsletter planner is $6,000. The planner’s assistant has an annual salary of $3,900 (6,000 + 3,900 = 9,900). This is the total of fixed cost. The variable cost per item for putting together six bimonthly newsletters is $4.50. The annual cost would then be $20. The Break Even Point Formula would be (20X + 9,900 + 4.50X and X = 639). This BEP will help the company make a profit from the newsletter because the assistant can put together up to 650 newsletters.

Resources
Martin, L. L. (2001). Financial Management for Human Service Administrators/Chapter 10 (4th ed.). Retrieved from https://portal.phoenix.edu.

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