-If the Price Per Unit Increases but the Cost Structure

question 56

Multiple Choice

$$\begin{array} { l r } \text { Sales } ( 100,000 \text { units) } & \$ 1,000,000 \\\text { Variable costs } & \underline { 300,000 } \\\text { Contribution margin } & 700,000 \\\text { Fixed manufacturing costs } & \underline { 250,000 } \\\text { Operating income } & 450,000 \\\text { Interest } & \underline { 60,000 } \\\text { Earnings before taxes } & 390,000 \\\text { Taxes (at } 31 \% \text { ) } & \underline { 120,900 } \\\text { Net Income } & \underline { \$ 269,100 } \\\text { Shares outstanding } & 10,000\end{array}$$
-If the price per unit increases but the cost structure remains the same:

• A) the break-even point rises.
• B) the degree of combined leverage increases.
• C) the degree of financial leverage increases.
• D) the break-even point falls.

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