Arthur Company Had the Following Data for the Year Just

question 52

Multiple Choice

Arthur Company had the following data for the year just ended:
$\begin{array}{|l|r|}\hline \text { Sales } & 4,000 \text { units } \\\hline \text { Sales price } & \$ 60 \text { per unit } \\\hline \text { Variable cost } & \$ 18 \text { per unit } \\\hline \text { Fixed costs } & \$ 42,000 \\\hline\end{array}$


-If the company's fixed costs decrease by 20% next year,all other factors remaining the same,by how much will the break-even level change compared to that of the current year,rounded to the nearest whole unit?

• A) 200-unit increase.
• B) 440-unit decrease.
• C) 200-unit decrease.
• D) No change in the break-even point.

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Definitions:

Opportunity Cost

The sacrifice of potential gains from other possibilities when a specific alternative is opted for.

Absolute Advantage

A condition in which a country, individual, or firm can produce a good or service at a lower cost per unit than competitors.

Specialization

Focusing on a narrow area of expertise or production, often leading to increased efficiency and productivity in that area.

Current Assets

Assets on a company's balance sheet that are expected to be converted into cash, sold, or consumed within a year or the business's operating cycle, whichever is longer.