Given the Following Data If Sales Decrease by 500 Units, by What Percent Would

question 45

Multiple Choice

Given the following data:
$$\begin{array} { l r r r } &{ \text { Per Unit } } & \text { Total } \\\text { Sales } & \$ 15 & \$ 45,000 \\\text { Less variable expenses } & 9 & 27,000 \\\text { Contribution margin } & 6& 18,000 \\\text { Less fixed expenses } & & 12,000 \\\text { Operating profit } & & \$ 6,000\end{array}$$
If sales decrease by 500 units, by what percent would fixed costs have to be reduced by to maintain current operating profit?

• A) 50.0%.
• B) 33.3%.
• C) 25.0%.
• D) 16.7%.

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Definitions:

Budgeted Factory Overhead

An estimate of the total indirect manufacturing costs that will be incurred to support operations during a specified period.

Plantwide Allocation Base

A single cost driver used throughout an entire plant or facility to allocate overhead costs to different products or cost objects.

Product Costing

Determining the cost of a product.

Continuing Operations

Continuing operations refer to the segments of a business that are expected to continue operating and generating revenue in the foreseeable future, excluding any discontinued operations.