In 2015 Stallman Co

question 210

Essay

In 2015 Stallman Co. had a break-even point of $800000 based on a selling price of $10 per unit and fixed costs of $200000. In 2016 the selling price and variable costs per unit did not change but the break-even point increased to $840000.
Instructions
(a) Compute the variable cost per unit and the contribution margin ratio for 2015.
(b) Using the contribution margin ratio compute the increase in fixed costs for 2016.

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Definitions:

Diseconomies of Scale

A situation in which a firm's production costs increase as it produces more, leading to less efficiency.

Essential Resource

A resource deemed vital for the survival of an organism, community, or operation, whose absence can lead to severe negative impacts.

Elastic Market Demand

Describes a market situation where the quantity demanded of a good or service significantly responds to changes in its price.

Perfectly Elastic Demand

Perfectly elastic demand is a market scenario where the demand for a product can drastically change (increase or decrease) at the slightest change in price, essentially to infinity.