Gail Co Sells a Single Product for $40 Per Unit

question 61

Multiple Choice

Gail Co sells a single product for $40 per unit. Fixed costs are $195 000 and variable costs equal 75% of sales. If fixed costs increase by $15 000, Gail will have to increase sales by how much just to earn profits equal to those earned before costs increased?

• A) $20 000
• B) $15 000
• C) $80 000
• D) $60 000

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Definitions:

Net Income

The profit of a company after all expenses and taxes have been subtracted from revenue.

Gross Margin Percentage

A financial metric that measures a company's financial health by dividing gross margin by total revenue, expressed as a percentage.

Provided Data

Information or figures that are supplied or available to be used for analysis or computation.

Book Value Per Share

A financial measure used to assess the per-share value of a company based on its equity available to common shareholders, divided by the number of outstanding shares.