Hi all.

I am trying to detemine the fixed cost for a company, if it has a marginal safety cost of $20,370, sales of $115,950 and variable expenses of $74,530. I tried working all aspects of this problem, however im still not coming up with the correct answer. Can anyone direct me as to how i can get the right answer for the problem?

Formulas: 1. Sales - Break Even Point = Margin of Safety

2. Sales - Variable Cost = Total Contribution

3. Break Even Point = Fixed Cost * (Total Sales /Total Contribution)



Solution Steps:

1. 115 950 - BEP = 20370

BEP = 95 580

2. 115 950 - 94 530 = TC

TC = 21420

3. 95 580 = FC * (115 950/21420)

FC = 17 656.95

emily-grace, please take a look at our guidelines about homework:
Ask Me Help Desk - Announcements in Forum : Homework Help (http://www.askmehelpdesk.com/finance-accounting/announcement-font-color-ff0000-u-b-read-first-expectations-homework-help-board-b-u-font.html)

We aren't here to just outright give a solution to people's homework - we're here to check their work and give further guidance from there, or answer general questions, not to just give them solutions. Giving them some basic equations is OK, but don't just solve it for them.

emily-grace. I would agree with morgaine. However, your answer needs to be rechecked.

As a guidance, I would suggest the following steps:

1. Calculate Contribution margin percentage
2. Apply that rate on Break even sales, you will get the CM on B/E Sales
3. The C M so determined should be the fixed costs since at Break even point, the contribution margin and fixed costs are equal.

The thread is a year old so it doesn't matter.

Her answer is only screwed up cause she copied 74,530 as 94,530. The method is a little odd but it does actually work when the right numbers are used to begin with.

(I figure if someone copies an incorrect solution, that's what they get for just copying answers and not learning how to do it.)

P.S. Although it is good to point out the incorrect answer for emily-grace's sake. I admit to not having read it cause the thread was old.

The thread is a year old so it doesn't matter.

Her answer is only screwed up cause she copied 74,530 as 94,530. The method is a little odd but it does actually work when the right numbers are used to begin with.

(I figure if someone copies an incorrect solution, that's what they get for just copying answers and not learning how to do it.)

I do appreciate your efforts when you point out the old age of the problem. I also appreciate when you inform the problem maker to read the guidelines. I think nobody does understand
nor they take it seriously. Is there any way to resolve such a situation?

It was my idea to add the stickie up there. If I remember correctly, the red stickie in the homework section was already there, and since homework was being posted here and in the finance forum all the time, I asked if we couldn't have the same notice about homework over here. What they posted was just to put homework over in the homework section where it belongs.

It was stupid of me to think people would actually read them, cause as you can see, no one pays any attention to either one. Rick even made it big & red. But no one reads anything. We can't force them to read it. When I just told people that we don't just do their homework for them, some would get ticked and leave me neg's for it. That's why I followed Curlyben's lead and started just putting the link up. I know most people don't follow it and read it. We can't help that.

There are other sites out there where people can simply get solutions to their homework. There are even ones where people can pay for the solutions to projects and such. (Nice and ethical.) So they expect it here too. Just like people on the computer forum asking for hacks and such, cause they can get them other places so they assume they can get them here. But this site really frowns on that stuff.

The ones who legitimately want help will actually post back and say something. The ones who just wanted solutions usually don't bother posting again.

There's stickies in other forums that people obviously don't pay attention to either. No one reads the TOS. That's typical of most places. (I read everything when I go to a new site, but I know I'm weird.)

OK, I'm rambling now. But at any rate, there's not much to do about it other than keep informing people. I just try to nip it in the bud when new members come on.

(As to the old threads... we all get caught in them occasionally when a newbie drags one up. I've seen a LOT of old threads drug up recently.)