Product 1 Has a Contribution Margin of £6

question 28

Multiple Choice

Product 1 has a contribution margin of £6.00 per unit, and Product 2 has a contribution margin of £7.50 per unit. Total fixed costs are £300,000. Sales mix and total volume varies from one period to another. Which of the following is TRUE?

• A)At a sales volume in excess of 25,000 units of 1 and 25,000 units of 2, operations will be profitable.
• B)The ratio of net profit to total sales for 2 will be larger than the ratio of net profit to total sales for 1.
• C)The contribution margin per unit of direct materials is lower for 1 than for 2.
• D)The ratio of contribution to total sales always will be larger for 1 than for 2.

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Definitions:

Real Defense

In negotiable-instruments law, any defense that can be used against everyone, including holders in due course. Also called absolute defense and universal defense.

Duress

An action by one party that forces another party to do what need not be done otherwise.

Personal Defense

In negotiable-instruments law, a defense that can be used against a holder but not against a holder in due course of a negotiable instrument. Also called limited defense.

Payment

The transfer of money or goods from one person or entity to another in exchange for goods, services, or to fulfill a legal obligation.