Kumar Produces Large Decorative Tiles Used in Home Decor

question 14

Multiple Choice

Kumar produces large decorative tiles used in home decor.The tiles sell for $720 and the fixed monthly operating costs are as follows:

Kumar's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and that anything past that point was pure profit.
Kumar's is planning to increase the selling price to $840.What impact will the increase in selling price have on the breakeven point in units?

• A)It will stay the same.
• B)It will go down from 12 to 10 units.
• C)It will go up from 10 to 13 units.
• D)It will go down from 10 to 8 units.

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Definitions:

Financial Advantage

The benefit gained by a company or individual from financial actions or investments, which may include increased income, reduced costs, or other monetary gains.

Joint Process

A manufacturing operation that simultaneously produces multiple products from a single raw material input.

Split-off Point

In a manufacturing process, the stage at which multiple products are generated from a common input, and each can be independently processed or sold.

Joint Production Costs

Costs incurred in the process of producing two or more products simultaneously from the same raw material or process.