The Wiltmore Co

question 116

Multiple Choice

The Wiltmore Co. would like to add a new product to complete their lineup. They want to know how many units they must sell to limit their potential loss to their initial investment. What is this quantity if their fixed costs are $12,000, the depreciation expense is $2,500, and the contribution margin is $1.30? (Round to whole units)

• A) 9,231 units
• B) 9,903 units
• C) 10,002 units
• D) 10,629 units
• E) 11,154 units

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Definitions:

Cash Break-Even

The amount of revenue necessary to cover all cash operating expenses, ignoring non-cash costs.

Fixed Costs

Expenses that do not change with changes in the volume of production or sales, such as rent, salaries, and insurance.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the percentage of fixed costs in a company's cost structure.

Financial Break-Even

The point at which total revenues and total expenses are equal, leading to a net income of zero.