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:

Activity Rate

A metric used to measure the efficiency or productivity of a company's operations, often tied to specific actions or tasks.

Departmental Factory Overhead Rate

A rate used to allocate indirect manufacturing costs to different departments within a factory.

Direct Labor Hours

The total time workers spend producing goods or providing services that can be directly attributed to a specific product or service.

Cutting and Sewing

The process involved in the making of garments, which includes the cutting of fabric according to patterns and sewing them together to create clothing.