26) During March, a firm expects its total sales to be $169,000, its total varia
ID: 2399535 • Letter: 2
Question
26) During March, a firm expects its total sales to be $169,000, its total variable costs to be $95,900, and its total fixed costs to be $25,900. The contribution margin for March is:
Multiple Choice
$73,100.
$25,900.
$47,200.
$121,800.
$95,900.
25)
Forrester Company is considering buying new equipment that would increase monthly fixed costs from $240,000 to $627,000 and would decrease the current variable costs of $60 by $15 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $600,000 and current break-even units are 6,000. If Forrester purchases this new equipment, the revised break-even point in dollars would be:
Multiple Choice
$330,000.
$763,636.
$1,140,000.
$436,364.
$600,000.
Explanation / Answer
Contribution margin = Sales – variable cost
=169000 – 95900
= 73100
--------------------------------------------------------------------------------------------------------------------------
Break-even point is the level of sales that a company must achieve to reach at no profit no loss situation,
The formula to calculate BEP (in units) = Total Fixed cost/(selling price per unit - variable cost per unit)
Where,
Fixed cost = $627000
Selling price = 100 per unit
Variable cost = 45 per unit
Let's put all the values in the formula to get the BEP in units,
BEP = 627000/ (100 - 45)
BEP = 627000/55
BEP = 11400 Units
So to reach the BEP company must sell 11400 units
Break-even point in $ can be calculated by multiplying BEP in units with sale price per unit
BEP in $ = BEP units * sales price per unit
BEP in $ = 11400 * 100
BEP in $ = 1140000
So BEP in $ is 1140000
Correct answer is C.
--------------------------------------------------------------------------------------------------------------------------
Feel free to comment if you need further assistance J
Pls rate this answer if you found it useful.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.