Refer to the Scenario Below to Answer the Following Questions

question 106

Multiple Choice

Refer to the scenario below to answer the following questions.
Breakeven Analysis at MRI (Scenario)
Mike has just been hired as a sales manager at Mobile Research Inc. (MRI) , makers of the popular Blueberry wireless phone. At his first management briefing, Mike is informed that the company is losing money, despite the immense popularity of the Blueberry phone. He learns that the company is facing intense competition from its main rival, Mandarin Communications, makers of the M-Phone. The M-Phone has the same popular features as the Blueberry and sells for $40 less. When Mike asked about the cost structure for the Blueberry he was informed that the selling price is $200, variable costs are $120, and total fixed costs are $800,000 per month.
-The following month, Mandarin reduced the selling price of the M-Phone to $140. If MRI decides to match this new selling price, how many Blueberry phones will it need to sell in order to break even?

• A) 24,000
• B) 32,000
• C) 40,000
• D) 48,000
• E) 60,000

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Definitions:

Business Entity Assumption

An accounting principle that treats a business as separate from its owner or any other business.

Business Entities

Business entities refer to legally recognized organizations designed to provide goods or services.

Owners

Owners are individuals or entities that hold legal title to assets, businesses, or property.

Business Entity Principle

The accounting concept that separates the transactions of a business from those of its owners or other businesses.