If Fixed Costs Are $550,000 and the Unit Contribution Margin

question 51

Multiple Choice

If fixed costs are $550,000 and the unit contribution margin is $15,what amount of units must be sold in order to realize an operating income of $125,000?

• A)45,000 units
• B)10,417 units
• C)45,833 units
• D)28,333 units

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Definitions:

Marginal Costs

The additional cost incurred by producing one extra unit of a product or service.

Economic Profits

Profits exceeding the opportunity costs of a next best alternative, measuring the extent to which a firm has generated excess returns over its costs, including the cost of capital.

Cost of Capital

The rate of return a company must earn on its investments to maintain its market value and attract funds.

Break-Even Quantity

The number of units that must be sold to cover all fixed and variable costs, resulting in neither profit nor loss.