Franklin Producers sells its core product for $8 per unit and has variable costs of $6 per unit. Total fixed costs are $28,000. Suppose variable costs increase by 20% due to an increase in the cost of direct materials
What will be the effect on the breakeven point in units?
A) Decrease from 2,000 units to 1,842 units
B) Decrease from 14,000 units to 4,118 units
C) Increase from 14,000 units to 35,000 units
D) Decrease from 4,667 units to 3,889 units
C
Explanation: C)
Sales $8.00
Less Variable expenses 6.00
Contribution Margin $2.00
Fixed expense $28,000/ $2.00 CM = 14,000 BE units
Sales $8.00
Less Variable expenses 7.20
Contribution Margin $ 0.80
Fixed expense $28,000/ $0.80 CM = 35,000 BE units
You might also like to view...
One reason a firm may not respond to another firm's competitive advantage is because it does not have the resources or capabilities to do so
Indicate whether the statement is true or false
Numerical facts and figures that are collected through some type of measurement process are called ________
A) statistics B) data C) information D) variables