You Have Been Provided with the Following Information If Unit Sales Decrease by 10%,how Much Will Fixed Costs

question 37

Multiple Choice

You have been provided with the following information:
$$\begin{array} { | l | r | r | } \hline&\text { Per Unit } & \text { Total }\\\hline \text { Sales } & \$ 15 & \$ 45,000 \\\hline \text { Less variable expenses } & \underline{ 9 }& \underline{27,000} \\\hline \text { Contribution margin } &6 & 18,000\\\hline \text { Less fixed expenses } & & \underline{12,000 } \\\hline \text { Operating profit } & &\$6,000\\\hline\end{array}$$
If unit sales decrease by 10%,how much will fixed costs have to be reduced by to maintain the current operating profit?

• A) $12,000.
• B) $4,500.
• C) $6,000.
• D) $1,800.

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Definitions:

Simultaneous One-time Game

A strategic interaction in game theory where all participants make decisions at the same time without knowledge of the others' choices.

Cartel

An association of independent businesses or countries that work together to control prices and limit competition within a certain industry or commodity market.

Oligopolists

Firms or entities within an oligopoly, a market structure characterized by a small number of large firms dominating the industry, which can influence prices and market outcomes.

Kinked-demand Model

An economic theory that predicts prices in certain competitive markets will remain stable despite economic pressures that would normally cause prices to fluctuate.