1. Company F sells one product that has a sales price of $20 per unit, variable
ID: 2420771 • Letter: 1
Question
1. Company F sells one product that has a sales price of $20 per unit, variable costs of $12 per unit, and total fixed costs of $200,000. What is the amount of sales volume in dollars necessary to attain a desired profit of $100,000?
A. 500,000 B. $750,000 C. $300,000 D. $150,000
2. Company C has variable costs of $80 per unit, total fixed costs of $200,000, and a break-even volume of 5,000 units. If the variable cost per unit decreases by $10, how many units must Company C sell to break-even? A. 4,000 units B. 5,000 units C. 6,000 units D. 3,000 units
3. Company C has variable costs of $80 per unit, total fixed costs of $200,000, and a break-even volume of 5,000 units. If the sales price per unit is increased by $10, how many units must Company C sell to break-even? A. 5,000 units B. 4,000 units C. 3,000 units D. 6,000 units
Explanation / Answer
1) Option B = $750,000
Sales volume in $ = [(Fixed cost+Desired Profit)/Contribution per unit]* Sales price per unit
= [(200,000+100,000)/8]*20
= $750,000
2) Option A = 4000 Units
Fixed cost = 200,000 and Break even unit = 5000 units
So , contribution per unit = Fixed cost / Break even point units
= 200000/5000
= 40 $
If Variable cost decreases by $10 then our contribution will increase by $10
New Contribution = 40+10
= $50
New Break even point = Fixed cost / Contribution per unit
= 200,000/50
= 4000 Units
3) Option B = 4000 Units
Same as question 2 , the increased sales price will result in $10 more Contribution.
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