Assume a Fixed Cost for a Process of $120,000

question 17

Multiple Choice

Assume a fixed cost for a process of $120,000. The variable cost to produce each unit of product is $35, and the selling price for the finished product is $50. Which of the following is the number of units that has to be produced and sold to break even?

• A) 5,000 units
• B) 6,000 units
• C) 8,000 units
• D) 11,000 units
• E) 12,000 units

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Definitions:

Sales Discounts

Reductions applied to the sale price as an incentive or for early payment.

Perpetual Inventory System

The inventory system of a company that keeps a continuous (perpetual) record of inventory on hand and of the cost of goods sold.

Periodic Inventory System

An accounting method where inventory levels and cost of goods sold are determined at set intervals, typically annually.

Perpetual Inventory System

An inventory management approach where records of inventory levels are updated on a continuous basis as transactions occur.