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Average Fixed Cost Example. Let's assume it costs Company XYZ $1,000,000 to produce 1,000,000 widgets per year. This $1,000,000 cost includes $500,000 of administrative, insurance, and marketing expenses. That $500,000 are the company’s fixed costs. $500,000 / 1,000,000 = $0.50 average fixed cost per unit.
If Pierre’s recipe makes 6 dozen cakes (72 cakes), the variable cost per unit would be $1. Variable cost/total quantity of output = x variable cost per unit of output. Variable cost per unit = = $72/72 = $1. When Pierre puts his cakes in the shop window for sale, he knows he must mark up the cost per cake starting at $1.
Modified Accelerated Cost Recovery System (MACRS) Example. Company XYZ buys office furniture (considered a 7-year property) for $10,000. According to the IRS table A-1, 7-year property is subject to 14.29% depreciation in the first year. In this situation, the depreciation expense for year 1 would be: $10,000 * 14.29% = $1,429.
Break-Even Point Definition. In accounting, economics, and business, the break-even point is the point at which cost equals revenue (indicating that there is neither profit nor loss). At this point in time, all expenses have been accounted for, so the product, investment, or business begins to generate profit. The concept of “breaking even ...
If a total of 10,000 phone cases are manufactured using the machine, and with a variable cost of $10,000 and a fixed cost of $5,000, the total manufacturing cost comes to $15,000. The per-unit total cost will then be computed as $15,000/10,000 = $1.50 per phone case.
Examples of common variable costs include labor directly involved in a company's manufacturing process and raw materials. For example, at XYZ Restaurant, which sells only pepperoni pizza, the variable expenses per pizza might be: Flour: $0.50 Yeast: $0.05 Water: $0.01 Cheese: $3.00 Pepperoni: $2.00 Total: $5.56. Its fixed expenses per month ...
As such, fixed costs will remain at $500,000. In this example, the total cost to produce 2 million widgets will rise to $1,500,000, and therefore the cost per widget will fall to $0.75 ($1.5 million/2 million widgets). Because the fixed costs have been spread over a larger number of units, the net cost per unit will decline from $1.00 to $0.75.
Fixed income securities provide periodic income payments at an interest or dividend rate known in advance by the holder. The most common fixed-income securities include Treasury bonds, corporate bonds, certificates of deposit (CDs) and preferred stock. Holders of Treasury bonds and CDs receive a fixed interest rate based on a par value over a ...
Net working capital can be calculated as follows: Say that a company has $100,000 in current assets and $25,000 in cash. Its current liabilities are $30,000 and debt considerations are $15,000: Net working capital = ($100,000 - $25,000) - ($30,000 - $15,000) = $60,000. This shows that the company has $60,000 to actually run the business.
Semi-variable costs remain fixed up to a particular production volume. Beyond this volume, semi-variable costs increase in direct proportion to output. Wages, for instance, are semi-variable costs which multiply by 1.5 beyond 40 hours worked in a given week (also called time-and-a-half).