A Company Has Provided the Following Data

question 25

Multiple Choice

A company has provided the following data:
If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, net operating income will:

• A) increase by $61,000.
• B) increase by $20,000.
• C) increase by $3,500.
• D) increase by $11,000.

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Definitions:

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold or used.

Process Costing

A costing method used in industries where production is continuous, allocating costs to products based on the process they go through.

Assembly Department

A segment of a manufacturing process where components are put together to assemble a final product.

Process Costing

An accounting methodology used for homogenous products, where costs are accumulated to produce an average cost per unit across the entire production process.