Walters Corporation Sells Radios for $50 Per Unit

question 181

Multiple Choice

Walters Corporation sells radios for $50 per unit. The fixed costs are $525000 and the variable costs are 60% of the selling price. As a result of new automated equipment it is anticipated that fixed costs will increase by $125000 and variable costs will be 50% of the selling price. The new break-even point in units is:

• A) 26250
• B) 26000
• C) 25750
• D) 21000

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Definitions:

Equity Method

An accounting technique used to record an investor's earnings proportional to their stake in an associates company.

Cost Method

An accounting technique used to value investments, where the investment is recorded at purchase cost without recognizing subsequent changes in market value.

Consolidated Income Statement

A financial statement that aggregates the financial performance of a company and its subsidiaries.

Sales Revenue

The total amount of money earned from goods and services sold before any expenses are subtracted.