Narchie Sells a Single Product for $50

question 38

Multiple Choice

Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs that amount to $400,000. Current sales total 16,000 units.
If Narchie sells 24,000 units, its safety margin will be:

• A) $200,000.
• B) $400,000.
• C) $1,000,000.
• D) $1,200,000.
• E) None of the other answers is correct.

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Definitions:

Work In Process Inventory

The inventory that includes items currently being manufactured but not yet completed or ready for sale.

Weighted-Average Method

An inventory cost calculation method that averages the cost of all similar items available, regardless of purchase date.

Equivalent Unit

A concept in cost accounting used to compute the cost of partially completed goods, translating them into a number of fully completed units.

Assembly Department

A section of a manufacturing company where components are assembled into final products.