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:

Market

A venue or mechanism where buyers and sellers engage in the exchange of goods, services, or financial instruments.

LIFO Inventory

An inventory valuation method where the last items added to inventory are the first ones to be used or sold.

Merchandise Inventory

Goods that a company holds for the purpose of selling them to customers, often a significant asset on the balance sheet for retailers.