If Fixed Costs Are $450,000, the Unit Selling Price Is

question 153

Multiple Choice

If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales (units) if the unit selling price increases by $10?

• A) 6,000 units and 5,294 units
• B) 18,000 units and 6,000 units
• C) 18,000 units and 12,858 units
• D) 9,000 units and 15,000 units

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Definitions:

Absorption Costing

A financial tracking approach that incorporates all costs associated with producing an item, such as direct materials, direct labor, along with all manufacturing overhead costs, whether they are fixed or variable.

Markup Percentage

The percentage added to the cost of goods to achieve a selling price, representing profit margin.

Required Return

The minimum profit or yield that investors expect to receive on an investment, considering the associated risks.

Target Costing

Target costing involves setting a planned cost for a product and then designing the product’s development cycle to meet this cost to maintain profitability.