36) Scott Incorporated management has budgeted the following amounts for its nex

Question

36) Scott Incorporated management has budgeted the following amounts for its next fiscal year: 36 $585,000- Total fixed expenses Selling price per unit Variable expenses per unt $50 $22 If fixed expenses increase by 10%, to maintain the original breakeven sales in units, the selling price per unit would have to be A) increased by 105.60%. C) decreased by 117.60%. B) increased by 5.6%. D) increased by 17.60%. 37) Elk Manufacturing has budgeted the following amounts for its next fiscal year: Total fixed expenses Selling price per unit Variable expenses per unit $425,000 $80 $20 To maintain the original breakeven sales in units if fixed expenses were to increase by 20%, the selling price per unit would have to be A) increased by 65.00%. C) decreased by 65.00% B) increased by 15.00%. D) decreased by 15.00%.

Explanation / Answer

36 Break even point=585000/(50-22)= 20893 Required contribution margin per unit=(585000*1.1)/20893= $30.80 Required selling price = 30.80+22 = $52.80 Increase in selling price=(52.80-50)/50= 5.6% Option B is correct 37 Break even point=425000/(80-20)= 20893 7.83 Required contribution margin per unit=(425000*1.2)/7083= $72 Required selling price = 72+20 = $92 Increase in selling price=(92-80)/80= 15% Option B is correct

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