A Product Sells for $30 Per Unit and Has Variable

question 3

Multiple Choice

A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are $720,000. If the variable costs per unit were to decrease to $15 per unit and fixed costs increase to $900,000, and the selling price does not change, break-even point in units would:

• A) Increase by 20,000.
• B) Equal 6,000.
• C) Increase by 6,000.
• D) Decrease by 20,000.
• E) Not changE.Current break-even point in units = $720,000/($30 - $18) = 60,000 units

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Definitions:

Incremental Cash Flows

Additional cash flow received by an organization from taking on a new project.

Leveraged Buyout

An acquisition of a company, primarily funded by borrowed money, where the assets of the company being acquired and those of the acquiring company are used as collateral.

Proxy Contest

An event where two or more competing parties seek to collect enough shareholder votes to control the company's board of directors.

Asset Purchase

The buying of a company's assets instead of its stock, often to acquire specific items rather than taking over the business entirely.