Capital One Produces a Single Product, Which It Sells for $8.00

question 116

Multiple Choice

Capital One produces a single product, which it sells for $8.00 per unit. Variable costs per unit equal $3.20. The company expects short-term fixed costs to be $7,200 for the coming month, at the projected sales level of 20,000 units. Management is considering several alternative actions designed to improve operating results. In conjunction with this, they have created a profit-planning (that is, a CVP) model, which can be used to evaluate different scenarios.

What is Capital One's current break-even point in terms of number of units for the month?

• A) 1,500 units.
• B) 2,250 units.
• C) 3,330 units.
• D) 4,000 units.

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Definitions:

Regular Interest

Interest that is paid at a standard rate on investments or charged on loans over a fixed period.

GIC

A Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period of time.

Compounded Monthly

A finance term where interest is calculated and added to the principal balance each month, increasing the amount of future interest earned.

Periodic Payment

Payments made or received regularly over a specific period, often monthly or annually.