A company has fixed costs (FC) of $3 millions. Cost of good sold consists of fixed manufacturing overhead (FMO) of $1 million and variable cost of good sold (VCGS) of 50%. I need to find the breakeven and the profits or loss if sales are $10 millions.
Where does the VCGS applies? Is it 50% of FMO, or FMO+FC?
I tend to believe it's 50% of FMO=500,000, but I am not sure since I am not a native English speaker.
Breakeven=>Revenue=Costs. Total costs: 3+1+0.5=$4.5 millions.
Profits, when sales $10 millions: Sales-Total costs= 10-4.5=$5.5 millions.
Correct me if I'm wrong.
Thank You!

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Originally Posted by admd82

A company has fixed costs (FC) of $3 millions. Cost of good sold consists of fixed manufacturing overhead (FMO) of $1 million and variable cost of good sold (VCGS) of 50%. I need to find the breakeven and the profits or loss if sales are $10 millions.
Where does the VCGS applies? Is it 50% of FMO, or FMO+FC?
I tend to believe it's 50% of FMO=500,000, but I am not sure since I am not a native English speaker.
Breakeven=>Revenue=Costs. Total costs: 3+1+0.5=$4.5 millions.
Profits, when sales $10 millions: Sales-Total costs= 10-4.5=$5.5 millions.
Correct me if I'm wrong.
Thank You!

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A little study of the subject will help you
http://en.wikipedia.org/wiki/Break-even_(economics)

Indeed is a little study...
You shouldn't have spent your valuable time for this answer.

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Originally Posted by admd82

Indeed is a little study...
You shouldn't have spent your valuable time for this answer.

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Happy to help