Falls Company Has a Contribution Margin of $32 Per Unit

question 70

Multiple Choice

Falls Company has a contribution margin of $32 per unit and fixed costs of $500,000,and it desires to earn a profit of $100,000.What is the sales volume in units required to achieve this desired profit?

• A) 3,125 units
• B) 18,750 units
• C) 15,625 units
• D) 12,500 units

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Definitions:

Conversion Costs

The combined costs of direct labor and factory overhead incurred to convert raw materials into finished goods.

Factory Overhead

All indirect costs associated with manufacturing beyond direct materials and direct labor, such as maintenance, utilities, and salaries of supervisory personnel.

Direct Labor

The cost of wages for employees directly involved in the production of goods or services.

Process Costing System

A costing method used in industries where production is continuous and units are indistinguishable from each other, allocating costs to units of product based on the process they go through.