What Would Target Operating Income Be When Fixed Costs Equal

question 72

Multiple Choice

What would target operating income be when fixed costs equal $6,000, unit contribution margin equals $40.00, and the number of units equals 400?

• A)$6,000
• B)$10,000
• C)$16,000
• D)$20,000
• E)$60,000

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Definitions:

Earnings per Share

A company's net profit divided by the number of its common shares outstanding, indicating the company's profitability on a per-share basis.

EBIT

Earnings Before Interest and Taxes; a measure of a firm's profit that includes all expenses except interest and income tax expenses.

Sales

The activity of selling goods or services in exchange for money or other compensation.

DFL

Degree of Financial Leverage, a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income.