A Manufacturer Contemplates a Change in Technology That Would Reduce

question 46

Multiple Choice

A manufacturer contemplates a change in technology that would reduce fixed costs from $800,000 to $600,000,and reduce depreciation expense from $125,000 to $100,000.However,the ratio of variable costs to sales will increase from 68% to 80%.What will happen to break-even level of revenues?

• A) A reduction to the level of $875,000
• B) A reduction to the level of $2,890,625
• C) An increase to the level of $3,500,000
• D) An increase to the level of $3,625,000

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Definitions:

Budget Procedure

The process of creating a plan to allocate resources and predict income and expenditures over a specific period.

Accounting Department

A department within a company responsible for managing financial records, ensuring compliance with standards, and providing financial reporting and analysis.

Static Budget

A budget that shows the expected results of a responsibility center for only one activity level; it is not changed, even if the activity changes.

Budgeting

The process of creating a financial plan to manage revenues, expenses, and resources over a specified period, often projecting future income and expenditures.