If Fixed Costs Are $600,000 and the Unit Contribution Margin

question 72

Multiple Choice

If fixed costs are $600,000 and the unit contribution margin is $12, what amount of units must be sold in order to realize an operating income of $100,000?

• A) 33,334 units
• B) 58,334 units
• C) 41,667 units
• D) 50,000 units

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Definitions:

Leverage Gain

The increase in potential returns to an investor achieved by using borrowed funds or financial derivatives.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements; it represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership.

Capital Structure

The composition of a company’s debt and equity used to finance its overall operations and growth.

Market Risk Premium

The additional return an investor requires from a market portfolio over the risk-free rate, compensating for the risk of the investment.