Dirth Company Sells Only One Product at a Regular Price

question 14

Multiple Choice

Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the contribution margin ratio when the selling price is reduced to $6 per unit?

• A) 25%
• B) 40%
• C) 75%
• D) 60%

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Definitions:

Neuroadaptation

The process by which the brain adjusts to changes in its environment, often in response to the sustained use of psychoactive substances.

Tolerance

The process by which the body progressively requires higher doses of a substance to achieve the same effect due to repeated exposure.

Drug Users

Individuals who consume illegal drugs or misuse prescription drugs for non-medical reasons.

Lightness Constancy

Refers to the ability of the human visual system to perceive the whiteness, grayness, or blackness of objects as constant under varying levels of illumination.