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:

Comprehensive Income

The total change in equity for a business that is not attributable to owners' investments or withdrawals.

Held-To-Maturity Securities

Debt securities that a company has the positive intent and ability to hold until they mature.

Noncurrent Assets

Long-term assets not expected to be liquidated or turned into cash within one year, such as property, plant, and equipment.

Unrealized Gains

Increases in value of assets that have not been sold yet, and therefore, the gains are not reflected in the financial statements as actual income.