Use the following to answer the next five questions: At Wendell Corporation, the

Question

Use the following to answer the next five questions: At Wendell Corporation, the selling price per unit is $800 and variable cost per unit is $500. Fixed costs are $1,000,000 per year. Wendell's contribution margin per unit is: a. $300 b. $375 c. 2,300 units d. None of the above. 6. 7. Wendell's break-even point is approximately a. 3,333 units b. 6,667 units c. 5,500 units d. None of the above 8. Assuming Wendell's sales are $3,000,000, profit will be: a. $125,000 b. $680,000 c. $750,000 d. None of the above If Wendell sells 20 units above its break-even point, what will be the company's net income? a. $16,000 b. $12,000 c. $6,000 d. $3,000 9. 10. Assume Wendell is selling 4,000 units. If Wendell decreases its advertising (a fixed cost) by $100,000, which results in 500 additional sales, what is Wendell's new net income? a. $160,000 b. $120,000 c. $250,000 d. $300,000

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer    Statementshowing Computations Paticulars Amount Q6 Sales price per unit                  800.00 Less Variable Expenses per unit                (500.00) Contribution Margin per unit = 800 - 500                  300.00 Contribution margin ratio = 300/800 37.50% Q7 Fixed cost      1,000,000.00 BEP = 1000,000/300               3,333.33 Q8 Sales        3,000,000.00 Contribution =3m*37.50%      1,125,000.00 Fixed cost      1,000,000.00 Income          125,000.00 Q9 No of units above BEP                     20.00 Net income = 20 *300               6,000.00 Q10 Sales= 4000*800      3,200,000.00 Less Variable Expenses = 4000 * 500    (2,000,000.00) Contribution Margin      1,200,000.00 Fixed cost          900,000.00 Net operating income          300,000.00

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