Fact Pattern:House Publishers offered a contest in which the winner would receive $1 million, payable over 20 years. On December
31, Year 4, House announced the winner of the contest and signed a note payable to the winner for $1 million, payable in $50,000 installments every January 2. Also on December 31, Year 4, House purchased an annuity for $418,250 to provide the $950,000 prize monies remaining after the first $50,000 installment, which was paid on January 2, Year 5.In its December 31, Year 4, balance sheet, at what amount should House measure the note payable, net of current portion?
A. $368,250
B. $418,250
C. $900,000
D. $950,00
A. $368,250
B. $418,250
C. $900,000
D. $950,00
1 answer:
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Answer:
d. Selling Price
Explanation:
Break even point is calculated as
Thus, break even point in units only in two cases,
- Fixed cost is reduced that is decreased,
- Contribution per unit is increased.
Now, here the options are
a. Increase in units sales volume is of no relevance as will not impact the fixed cost or contribution per unit.
b. Increase in fixed cost will result in higher break even point, as numerator in the fraction will increase.
c. Increase in unit variable cost will ultimately decrease the contribution thus, it is of no relevance.
d. Increase in selling price will increase the contribution per unit, that is the increase in denominator value in fraction, thus, break even units will decrease.
Correct option is
d. Selling Price