Abrams Co Has Total Fixed Costs of $240,000 and a Contribution

question 61

Essay

Abrams Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will sales have to increase to cover this increase in costs?

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Definitions:

Interest-Rate Effect

A theory suggesting that a change in interest rates will affect the level of spending on consumer goods and services due to the changes in borrowing costs.

Aggregate-Demand Curve

A curve that shows the total quantity of goods and services that all households, companies, government, and foreign buyers will purchase at each price level.

Exchange-Rate Effect

The impact of a change in the domestic currency's value on the country's international trade balance, influenced by the relative prices of domestic and foreign goods.

Price Level

An indicator of the mean cost of commodities and services within an economy at a specific point in time.