MINI-CASE Smith Automotive Is a Company That Produces Component Parts for for Automobile

question 24

Multiple Choice

MINI-CASE
Smith Automotive is a company that produces component parts for automobile engines.A margin of $4 per unit produces fixed expenses of $80 million.The market demand for the component parts is 400 million units per year.
-Mini-Case Question.Determine the margin per unit if the company needs to sell 40 million units in order to break even.

• A)$10 per unit
• B)$8 per unit
• C)$4 per unit
• D)$2 per unit
• E)$1 per unit

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Definitions:

Cash Distributed

The act of disbursing or paying out cash from a company to its stakeholders, such as dividends to shareholders or payments to suppliers.

Business Entity Assumption

An accounting principle that treats a business as a separate entity from its owners for reporting and financial assessment purposes.

Owners

Individuals or entities that legally possess an asset, business, or property.

Obligations

Obligations are financial responsibilities or legal commitments that arise from contracts, agreements, or other binding arrangements.