A Firm Has Fixed Operating Costs of $25,000, a Per

question 50

Multiple Choice

A firm has fixed operating costs of $25,000, a per unit sales price of $5, and a variable cost per unit of $3. What is its operating breakeven point if it desires net operating income of $10,000, not $0 (zero) ?

• A) 12,500 units
• B) 15,000 units
• C) 17,500 units
• D) 25,000 units

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Definitions:

Direct Labor Costs

Expenses that are directly associated with the manufacturing of a product or the delivery of a service, such as wages of workers on the production line.

Factory Overhead

Indirect manufacturing costs not directly tied to individual products, encompassing expenses like factory rent, utilities, and equipment depreciation.

Work in Process Inventory

Items in a manufacturing process that are partially completed but not yet finished goods.

Raw Materials Used

The quantity of basic materials and components consumed in the production process to manufacture goods.