Lever Products (LP)is Considering the Elimination of a Press Machine

question 46

Multiple Choice

Lever Products (LP) is considering the elimination of a press machine.The new press machine should reduce depreciation expenses by $80,000 annually.If LP's total fixed costs were $420,000 last year,what would LP's new break-even point in units if the contribution margin is 3.75 per unit?

• A) 68,000 units
• B) 90,667 units
• C) 100,800 units
• D) 50,667 units

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Definitions:

Allowances

Funds set aside or discounts offered to account for various factors such as potential returns, defective goods, or customer satisfaction initiatives.

Income-Sharing Ratio

An agreed upon proportion used to distribute profits or losses among partners in a partnership.

Limited Liability Company

A corporate model that integrates the flow-through taxation characteristic of partnerships and sole proprietorships with the protective limited liability found in corporations.

Business Entity

A legal organization created by individuals, stockholders, or shareholders, with the purpose of operating for profit.