Which of the Following Statements Regarding Company a Is Incorrect

question 115

Multiple Choice

Which of the following statements regarding Company A is incorrect?

• A) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even volume in units is 36,000 units.
• B) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit.
• C) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, once it has covered its fixed costs, net income will increase by $30 for each additional unit sold.
• D) Both if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even volume in units is 36,000 units and if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit are incorrect.

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Definitions:

Spare Plant Capacity

The additional production capacity available in a facility that is not currently being used, allowing for increased output without significant new investment.

Operational Hours

The hours during which a business or service is operational and open to customers.

Capacity Management

The process of planning and controlling the resources needed to meet product demand while maximizing operational efficiency.

Subcontracting

This refers to the practice of assigning or outsourcing part of the obligations and tasks under a contract to another party known as a subcontractor.