Newton Company Currently Produces and Sells 4,000 Units of a Product

question 71

Multiple Choice

Newton Company currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $18,000. The company is considering investing in new technology that would decrease the variable cost per unit to $8 per unit and double total fixed costs. The company expects the new technology to increase production and sales to 9,000 units of product. What sales price would have to be charged to earn a $99,000 desired profit assuming the investment in technology is made?

• A) $22
• B) $23
• C) $15
• D) $13

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Definitions:

Miles

A unit of distance measurement equal to 5,280 feet or approximately 1.609 kilometers.

Waterfall

A model or process that visually represents the sequential and cumulative effect of a series of transactions or events, often used in project management and finance.

Rest

The remaining part of something, often used when dividing or after subtracting a portion.

Ounces

A unit of weight used primarily in the United States, part of the imperial and US customary systems, equivalent to 28.35 grams.