Cino Inc. earned revenue of $560,000 and depreciation and amortization for the unit was $50,000. The company sells its product to customers at a price of $100. Further, the financial statement reveals that the EBIT for the year was $80,000. The variable cost for each unit of brake pad is $60. What is the amount of fixed cost that leads to the EBIT as provided in the financial statement?

Question

Quizplus · Accepted Answer

We can use the formula for calculating EBIT:

EBIT = Revenue - Variable Costs - Fixed Costs - Depreciation & Amortization

Here, we have the following values:

Revenue = $560,000
EBIT = $80,000
Variable cost per unit = $60
Depreciation & Amortization = $50,000

We can calculate the number of units sold as:

Number of units sold = Revenue / Price per unit
= $560,000 / $100
= 5600 units

Now, we can use the EBIT formula to find the fixed cost:

$80,000 = $560,000 - ($60 x 5600) - Fixed Costs - $50,000

Simplifying the equation, we get:

Fixed Costs = $560,000 - ($60 x 5600) - $80,000 + $50,000
= $94,000

Therefore, the amount of fixed cost that leads to the EBIT as provided in the financial statement is $94,000, which is option C.

Cino Inc Earned Revenue of $560,000 and Depreciation and Amortization for for the Unit