Stellar Co. has the following sales, variable costs, and fixed costs. If sales increase by...

Question:

Stellar Co. has the following sales, variable costs, and fixed costs. If sales increase by $10,000, then their profit increases or decreases by how much?

Sales = $50,000

Variable costs = $9,300

Fixed costs = $26,000

Variable Costs, and Fixed Costs:

Variable costs are the cost changes with the change in production activities As production increases then the variable cost will change and production activities decrease then the variable cost will also decrease and Fixed cost will remain the same.

Answer and Explanation: 1

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Contribution Margin = Sales - Variable Cost

= $50,000 - $9,300

= $40,700

Contribution Margin = Fixed Cost + Profit

$40,700 =...

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Variable Cost: Definition, Formula & Examples

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Chapter 23 / Lesson 7
65K

Variable costs change in direct correlation with production and service levels when businesses produce goods or provide services. Explore the formula of variable costs, review key examples, and discover how variable costs fit into categorizing costs.


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