The Variable Costs Per Unit Are $6 When a Company

question 15

Multiple Choice

The variable costs per unit are $6 when a company produces 12,000 units of product. What are the variable costs per unit when 14,000 units are produced?

• A) $4.50.
• B) $5.00.
• C) $5.50.
• D) $6.00.
• E) None of the other answers are correct.

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Definitions:

EBIT

Earnings Before Interest and Taxes represent a company's profit before deducting expenses from interest and income taxes.

Sales Increase

An uptick in the amount of products or services sold by a company, typically measured within a specific time frame.

MM Model

MM Model refers to the Modigliani-Miller theorem, which propositions about the irrelevance of capital structure in determining the overall value of a firm under certain market conditions and assumptions.

Optimal Capital Structure

Optimal capital structure is the ideal mix of debt and equity financing that minimizes a company's cost of capital and maximizes its stock price.