A Firm with $50,000 in Fixed Costs, Selling Price of $25

question 71

Multiple Choice

A firm with $50,000 in fixed costs, selling price of $25 per unit, and variable costs of $5 a unit is currently operating at breakeven volume. If sales decrease 50 units and costs remain the same, the firm will:

• A) have a loss of $1,000.
• B) have a profit of $2,000.
• C) increase variable costs of $2,500.
• D) lower its total fixed costs.

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Definitions:

Operating Needs

The essential requirements necessary for a business to maintain and grow its operations, including working capital, equipment, and inventory.

Sales Revenue

Money a company makes from its merchandise sales or services rendered.

Service Charge Expense

Service charge expense refers to fees charged for specific services provided, often recognized as an expense in accounting records.

Accounts Receivables

Sums due to a company from its clients for products or services provided but not yet compensated for.