Cino Inc. earned from its brake pads manufacturing unit 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

To calculate the fixed cost, we can use the formula:

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

Substituting the given values, we get:

$80,000 = $560,000 - ($60 x Q) - FC - $50,000

where Q is the quantity of brake pads sold.

Solving for FC, we get:

FC = $560,000 - ($60 x Q) - $80,000 - $50,000

FC = $430,000 - ($60 x Q)

We do not have information about the quantity of brake pads sold, but we can use the selling price to calculate it:

$100 x Q = $560,000

Q = 5,600 units

Substituting Q in the formula for FC, we get:

FC = $430,000 - ($60 x 5,600)

FC = $94,000

Therefore, the amount of fixed cost that leads to the EBIT is $94,000 (option C).

Cino Inc Earned from Its Brake Pads Manufacturing Unit Revenue of of $560,000