Nonesuch Company Sells Only One Product at a Regular Price

question 83

Multiple Choice

Nonesuch Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales.
What is the sales dollars level required to break even at the old price of $7.50?

• A)$50,000
• B)$12,000
• C)$18,000
• D)$75,000

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Definitions:

Overhead Rate

A measure used in cost accounting to allocate overhead costs to produced units, typically expressed as a percentage or a ratio.

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate manufacturing overhead costs to individual units of production based on a specific activity base.

Direct Labor Costs

Expenses related to employees who are directly involved in the production of goods or services, as opposed to administrative or managerial staff.

Factory Overhead

Indirect costs associated with manufacturing, including utilities, maintenance, and salaries of supervisors, not directly involved in production.