If Fixed Costs Are $400,000 and the Unit Contribution Margin

question 155

Multiple Choice

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit?

• A) 25,000 units
• B) 10,000 units
• C) 400,000 units
• D) 20,000 units

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Definitions:

Merchandise Inventory

Products that a retailer, wholesaler, or distributor has in stock and available for sale.

Cost of Goods Sold

Represents the direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Perpetual Inventory System

An inventory tracking system where inventory levels are updated in real-time with each sale or purchase transaction, giving a continuous account of inventory on hand.

Perpetual Inventory System

An inventory tracking system that updates item records continuously as transactions occur.