Reference: 08-01
the Following Is Addison Corporation's Contribution Format Income

question 11

Multiple Choice

Reference: 08-01
The following is Addison Corporation's contribution format income statement for last month: $$\begin{array} { | l | c | } \hline \text { Sales } & \$ 1,000,000 \\\hline \text { Less variable expenses } & 700,000 \\\hline \text { Contribution margin } & 300,000 \\\hline \text { Less fixed expenses } & 180,000 \\\hline \text { Net income } & \$ 120,000 \\\hline\end{array}$$ The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month.
-What is the company's break-even point in units?

• A)20,000 units.
• B)12,000 units.
• C)18,000 units.
• D)8,000 units.

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Definitions:

Future Dividends

Expected payments made by a corporation to its shareholder members based on future earnings, typically projected by the company’s management or analysts.

Target Payout Ratio

A goal set by a company to distribute a certain percentage of earnings to its shareholders in the form of dividends.

Dividend Payments

Dividend payments refer to the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Signaling Effect

A theory in finance that suggests when a company announces an increase or decrease in dividends, it signals its financial health and prospects to investors.