The Portable MBA in Finance and Accounting by Grossman Theodore & Livingstone John Leslie

Author:Grossman, Theodore & Livingstone, John Leslie [Grossman, Theodore]
Language: eng
Format: mobi, epub
ISBN: 9780470526316
Publisher: Wiley
Published: 2009-10-07T16:00:00+00:00

The process is relatively straightforward. Cost of sales mostly likely is comprised of a fixed and a variable element. From quarter 1 to quarter 2 as net sales increased by $35.0 million ($253.7 → $288.7), cost of sales increased $11.2 million ($140.3 → $151.5). This implies that the variable cost element is 32% of net sales ($11.2 ÷ $35.0 = 0.32). And if we assume that this is true, then we can estimate the fixed cost element since total cost of sales = variable cost of sales + fixed cost of sales. Using either quarterly numbers:

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