Rom Generators Is in the Process of Preparing a Production

question 96

Multiple Choice

Rom Generators is in the process of preparing a production cost budget for August.Actual costs in July for the production of 60 generators were: $\begin{array}{lr}\text { Materials cost } & 5,200 \\\text { Labor cost } & 2,600 \\\text { Rent } & 1,200 \\\text { Depreciation } & 1,700 \\\text { Other fixed costs } & 4,600\\\text { Total }&\$15,300\end{array}$ Materials and labor are the only variable costs.The company has estimated that it can increase sales to 70 generators in August if it changes the selling price of generators to $450 instead of the current $480 per unit.What is expected to occur to the cost per unit given the expected changes?

• A)It will decline because fixed costs do not increase with increases in volume.
• B)It will decline because selling price per unit declines.
• C)It will increase because more units will be produced.
• D)It will increase because fixed costs do not increase with increases in volume.

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Definitions:

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A legal entity recognized by law as separate from its owners, with its own rights, responsibilities, and liabilities.

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Individuals or entities that own shares in a corporation, granting them certain rights and potential financial benefits from the company's performance.