Example research essay topic: Fixed Costs Variable Costs - 486 words

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Assumptions: Tax rate = 28 % Working week = 40 hours One bundle to produce takes up 7. 43 hours: Hot Cold Item Bundle 0. 33 0. 08 Vases 6 0. 25 0. 17 Paperweights 4 0. 17 0. 07 Tumblers 14 Therefore there are (40 / 7. 43) = 5. 38 bundles can be produced in one week. If Harry works 40 weeks per year, then his output is 215 bundles a year. A. An income statement for 2000 in traditional format. Revenue 146, 200. 00 Variable costs: Pack & ship cost - 17, 200. 00 Sams direct labour - 4, 300. 00 Fixed costs: Production OH - 112, 000. 00 Selling OH - 6, 050. 00 Sams indirect wage - 9, 360. 00 Income - 2, 710. 00 Tax @ 28 % - 758. 80 Net income - 3, 468. 80 B. An income statement for 2000 in contribution format.

Revenue 146, 200. 00 Variable costs: Pack & ship cost - 17, 200. 00 Sams direct labour - 4, 300. 00 Contribution: 124, 700. 00 Fixed Costs: Production OH - 100, 000. 00 Selling OH - 6, 050. 00 Sams indirect wage - 9, 360. 00 Income 9, 290. 00 Tax @ 28 % 2, 601. 20 Net income 11, 891. 20 C. Calculate breakeven point for a years activity including Harry's desired net income. Break-even point is the point at which Total Costs of the Enterprise equal its Total Revenues. Therefore the calculations in case of Harry's Glass Items Workshop are as follows: Total costs: Fixed costs: Selling overhead 6050. Sams indirect labour 9360. USD 2800 per week of fixed costs (112, 000 for 40 weeks.

Total Fixed Cost = 6050 + 9360 + 112000 = 127410. Variable costs are: USD 80 of packing and shipping and USD 20 of Sams labour per one bundle of glass items. The formula for simple break-even will be: X 680 = 127410 + 100 X, where X is the quantity of bundles. 580 X = 127410. X = 127410 / 580 = 220 bundles of glass items. The Breakeven with desired 25, 000 income is: - 25000 + 680 X = 127410 + 100 X 580 X = 152410 X = 263 bundles of glass items. D.

What conclusions can you reach about Harry's operations? It is obvious that Harry is facing some difficulties in his operations. One thing is that his fixed costs are rather high. The other is that he is unwilling to utilize the full capacity of his enterprise for the sake of increasing the total revenue (the demand for his products is very high the production could be boosted twice). Currently Harry is having savings because he does most of the work himself and thus avoids salary expenses.

However my conclusion would be to expand the business.

Research essay sample on Fixed Costs Variable Costs