Question

Let’s say for example, that a certain business X is undertaking a new project: In year...

Let’s say for example, that a certain business X is undertaking a new project:

In year 1 the business is attracting 100 customers

In year 2 110 customers

In year 3 121 customers

In order to proceed with the project. The business would need additional staff salaries. Those would be 10k in year 1, 20k in year 2 and 30k in year 3, in addition of existing annual staff salaries of 15 k. are the additional staff salaries a fixed cost, a variable cost, or a semi-fixed cost? In the last case, how de we calculate it ?

Homework Answers

Answer #1

Considering the additional staff salaries:

These are semi fixed costs.

in case of semi fixed cost, total semi fixed cost= Fixed cost+ variable cost

Variable component can be calculated as follows: changes in total cost/ changes in total output

Part1: therefore taking 100 and 110 units:

chnages in total semi variable cost= 20k-10k=10k

changes in output= 110-100=10

therefore variable cost per additional units= 10k/10=1k

hence, for 110 units: variable cost=1k*10=10000, fixed cost= 20000-10000=10000

Part 2: now considering 110 and 121 units: changes in total cost= 10k, changes in output=11

variable cost per additional unit= 10k/11=909

therefore, for 10 units after 100, variable cost is (calculated in part 1)=10000

for 11 units after 110, variable cost is= 909*11= 9999

fixed cost= 30000-10000-9999= 10001 (approx, 10000)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Howell Petroleum is considering a new project that complements its existing business. The machine required for...
Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs GH¢3.8 million. The marketing department predicts that sales related to the project will be GH¢2.5 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straightline method. Cost of goods sold and operating expenses related to the project are predicted...
Thurston Petroleum is considering a new project that complements its existing business. The machine required for...
Thurston Petroleum is considering a new project that complements its existing business. The machine required for the project costs $4.35 million. The marketing department predicts that sales related to the project will be $2.45 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated to zero over its 4-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to...
Thurston Petroleum is considering a new project that complements its existing business. The machine required for...
Thurston Petroleum is considering a new project that complements its existing business. The machine required for the project costs $4.85 million. The marketing department predicts that sales related to the project will be $2.68 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated to zero over its 4-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to...
Japan National Petroleum is considering a new project that complements its existing business. The machine required...
Japan National Petroleum is considering a new project that complements its existing business. The machine required for the project costs $2 million. The marketing department predicts that sales related to the project will be $1.2 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated to zero over its 5-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted...
Howell Petroleum is considering a new project that complements its existing business. The machine required for...
Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.82 million. The marketing department predicts that sales related to the project will be $2.52 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted...
Johnny Wellington, an entrepreneur who wants to engage in a short term business project, comes to...
Johnny Wellington, an entrepreneur who wants to engage in a short term business project, comes to you for advice. As an expert in capital budgeting, Johnny wants you to study the feasibility of the project. In particular, he needs your help to forecast the upcoming cash flows the project is going to require and generate throughout its life. After a few meetings with Johnny and his business partners, you suggest that a pilot run be conducted. Upon completion of the...
CAPITAL BUDGETING PROJECT NEWMAN ENTERPRISES, Inc. is a multinational conglomerate corporation providing a wide range of...
CAPITAL BUDGETING PROJECT NEWMAN ENTERPRISES, Inc. is a multinational conglomerate corporation providing a wide range of goods and services to its customers. As part of its budgeting process for the next year, it has three mutually exclusive projects under consideration, and it might decide which project should receive the investment funds for this year. As part of the financial analysis team, it is up to you to determine the appropriate valuation of each project. However, before you can determine the...
Rio Negro, Inc. (RNI) is in the business of transporting cargo between ports in California and...
Rio Negro, Inc. (RNI) is in the business of transporting cargo between ports in California and Washington. Its fleet includes a small dry-cargo vessel, the Maracas. The Maracas is 25 years old and badly in need of an overhaul. It is March 2016, and Michael John, the finance director, has just been presented with a proposal that would require the one-time expenditures shown below in Table 1. If the proposal is accepted, these expenditures will be made in the next...
Late in 2018, Felix Machine Company (FMC) management was considering expansion of the company’s international business...
Late in 2018, Felix Machine Company (FMC) management was considering expansion of the company’s international business activities. FMC is a South Carolina–based manufacturer of compound machines for use in industrial equipment. FMC’s worldwide market was supplied from subsidiaries in France, Brazil, and Taiwan, as well as from the United States. The company was particularly successful in Asia, mainly due to the high quality of its products, its technical expertise, and excellent after-sale service. This success led corporate management to consider...
The Business Case for Agility “The battle is not always to the strongest, nor the race...
The Business Case for Agility “The battle is not always to the strongest, nor the race to the swiftest, but that’s the way to bet ’em!”  —C. Morgan Cofer In This Chapter This chapter discusses the business case for Agility, presenting six benefits for teams and the enterprise. It also describes a financial model that shows why incremental development works. Takeaways Agility is not just about the team. There are product-management, project-management, and technical issues beyond the team’s control. Lean-Agile provides...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT