Capital One Produces a Single Product,which It Sells for $8

question 41

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 expected total 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 model,which can be used to evaluate different scenarios.
Suppose that management believes that a $1,600 increase in the monthly promotion costs will provide a boost to sales.By what amount must sales increase during the month to justify the contemplated expenditure? Round up to the nearest whole number.

• A)200 units.
• B)334 units.
• C)400 units.
• D)668 units.
• E)None of the above.

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Definitions:

Net Income

The final amount a company earns, post all deductions for expenses and taxes from its overall revenue.

Total Dividend Payment

The sum of all dividends a company pays out to its shareholders over a specific period.

Stock Split

A stock split is a corporate action that increases the number of a company's shares by dividing each share, which can make the stock more affordable to investors.

Total Market Value

The combined market price or value of all of a company's outstanding shares, reflecting its overall market capitalization.