Evans Company Has Estimated the Following Amounts for Its Next

question 108

Multiple Choice

Evans Company has estimated the following amounts for its next fiscal year: What will happen to the breakeven point (in units) if Evans can reduce fixed expenses by $22,500?

• A)The breakeven point will decrease by 1,500 units.
• B)The breakeven point will decrease by 562 units.
• C)The breakeven point will decrease by 900 units.
• D)The breakeven point will increase by 562 units.

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Definitions:

Equivalent Units

A concept used in cost accounting to convert partially completed goods into a number of completed units for inventory and cost analysis purposes.

Conversion Cost

The combined cost of direct labor and manufacturing overhead, associated with the transformation of raw materials into finished goods.

Equivalent Units

A term used in cost accounting to express the amount of work completed in terms of fully finished units, adjusting for partial completions in the production process.

Weighted Average Method

The weighted average method is an accounting technique used to calculate the cost of goods sold and ending inventory by assigning an average cost to each item based on the weight of its cost in the total inventory.