Answer the Following Questions Using the Information Below:
Gundagai Company

question 11

Multiple Choice

Answer the following questions using the information below:
Gundagai Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}\text { Selling price per unit } & \$ 28.50 \\\text { Variable costs per unit: } & \\\quad \text { Direct material } & \$ 5.25 \\\text { Direct manufacturing labour } & \$ 1.15 \\\text { Manufacturing overhead } & \$ 0.25 \\\quad \text { Selling costs } & \$ 1.85 \\\text { Annual fixed costs } & \$ 110000\end{array}$
-The number of units that Gundagai must sell each year to break even is:

• A)1000 units.
• B)4000 units.
• C)5500 units.
• D)indeterminable.

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Definitions:

CVP Model Assumptions

Assumptions underlying the Cost-Volume-Profit analysis, including constant unit selling prices, variable costs per unit, and total fixed costs.

Product Mix

The variety of products a company offers to its customers, encompassing breadth, depth, and diversity of the product lines.

Linear Cost Behaviour

A cost behavior where costs change in direct proportion to changes in volume of activity.

Break-Even Sales Units

The number of units that must be sold to cover all fixed and variable costs, resulting in zero net profit or loss.