Management at the Forrest Company Currently Sells Its Products for $225

question 141

Multiple Choice

Management at the Forrest Company currently sells its products for $225 per unit and is contemplating a 40% increase in the selling price for the next year.Variable costs are currently 25% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will still pay the same variable cost per unit) .Fixed expenses are $120,750 per year.
If fixed costs were to decrease 10% during the current year and the new selling price goes into effect,how many units will need to be sold to breakeven?

• A)420 units
• B)358 units
• C)908 units
• D)132,825 units

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Definitions:

Rivalry

The characteristic displayed by certain goods and services that consumption by one person precludes consumption by others.

Buys

The act of acquiring goods or services in exchange for money.

Product

Any good, service, or idea that can be offered to a market to satisfy a want or need.

Majority

Majority refers to more than half of a particular group or quantity, often used to describe the greater part of a population or collection.