Question

Othello S. Corporation produces and sells a single product. The information about their operation for the last month is given below. Price per unit $40.00 Contribution margin ratio 50% Fixed expenses $8000 Operating leverage 2 Q: How many units did they sell during the last month

Answer 1

Answer:

400 units

Explanation:

price per unit $40

variable costs per unit $20

fixed expenses $8,000

operating leverage = fixed costs / total costs

• operating leverage = 2
• fixed costs = $8,000
• total costs = ($8,000 + total variable costs)

2 = $8,000 / ($8,000 + total variable costs)

2($8,000 + total variable costs) = $8,000

$4,000 + 0.5(total variable costs) = $8,000

0.5(total variable costs) = $4,000

total variable costs = $4,000/0.5 = $8,000

total variable costs = total output x variable cost per unit

$8,000 = total output x $20

total output = $8,000 / $20 = 400 units