Chesterfield Corporation Has Been Operating Well Above Its Break-Even Point

question 119

Multiple Choice

Chesterfield Corporation has been operating well above its break-even point.What will happen to Chesterfield's margin of safety if the variable cost per unit increases?

• A) The break-even point would decrease, and the margin of safety would decrease.
• B) The break-even point would decrease, and the margin of safety would increase.
• C) The break-even point would increase, and the margin of safety would decrease.
• D) The break-even point would increase, and the margin of safety would increase.

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Definitions:

Total Price

Refers to the complete amount of money required to purchase a product or service, including all associated fees and taxes.

Materials Markup

The amount added to the cost price of materials to cover overhead and profit when pricing a product or service.

Direct Labor Rate

The wage rate paid to employees directly involved in manufacturing goods or providing services, expressed per hour or per unit of output.

Time and Materials Pricing

A contract or pricing method where the customer pays the supplier based on the time spent to complete the work and the cost of materials used.