Lightfoot Company Sells Its Product for $55 and Has Variable

question 10

Multiple Choice

Lightfoot Company sells its product for $55 and has variable costs of $30 per unit. The total fixed costs are $25,000. What will be the effect on the breakeven point in units if variable costs increase by $5 due to an increase in the cost of direct materials?

• A)It will increase by 250 units.
• B)It will decrease by 250 units.
• C)It will decrease by 167 units.
• D)It will increase by 167 units.

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Definitions:

Indirect Approach

A method of communication or problem-solving that is not straightforward, often involving suggestion or implication rather than direct statements.

Investing Activities

Financial operations that involve the purchase and sale of long-term assets and other investments not considered cash equivalents.

Financing Activities

Refers to the transactions and events that affect long-term liabilities and equity of a company, including issuing debt, selling shares, and paying dividends.

Direct Approach

A method of income statement preparation where expenses are listed directly against revenue items to show the net income.