The Information That Follows Was Obtained from the Accounting Records $\begin{array}{lr}\text { Sales } & \$ 8,800,000 \\\text { Variable costs } & 2,400,000 \\\text { Fixed costs } & 6,016,000\end{array}$

question 42

Essay

The information that follows was obtained from the accounting records of Gladstone Manufacturing during a period when the company sold 100,000 units. $\begin{array}{lr}\text { Sales } & \$ 8,800,000 \\\text { Variable costs } & 2,400,000 \\\text { Fixed costs } & 6,016,000\end{array}$
Required:
A. Compute the company's per-unit contribution margin and break-even point in units.
B. How many units must Gladstone sell to produce a target profit of $550,400?
C. Assume that Gladstone was able to reduce the variable cost per unit by $4. What selling price could management charge if it desired to maintain the current break-even point?
D. Depreciation charges of $640,000 are included in the firm's fixed costs of $6,016,000. If these charges were to increase by 10%, what effect, if any, would this cost increase have on the company's contribution margin?

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Definitions:

Mutual Interdependence

A situation where entities are dependent on each other to some extent, highlighting the interconnected nature of their activities or survival.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for significant differentiation among competitors.

Oligopoly

A market configuration where the market is dominated by a few firms, resulting in restricted competition.

Soft Drink

A non-alcoholic beverage typically containing carbonated water, a sweetener, and natural or artificial flavoring.