Question

Which of the following statements regarding Company A is incorrect? Multiple Choice If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units. If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit. If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, once it has covered its fixed costs, net income will increase by $30 for each additional unit sold. Both if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units and if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit are incorrect.

Answer 1

Answer:

option 1 and 4 are incorrect.

Explanation:

Company A

1)If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units.

Break Even in units= Fixed Costs/ Contribution Margin Per unit

Break Even in units=720000/ 30= 24000 which is incorrect.

2)If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit.

Contribution Margin = Selling Price- Variable Expenses= 50- 30= $20

True.

3)If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, once it has covered its fixed costs, net income will increase by $30 for each additional unit sold.

True

Once the break even sales point is reached the next contribution margin would be profit if the fixed costs remain constant.

4)a)Both if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units   Incorrect Break Even in units=720000/ 30= 24000

4)b)and if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit are incorrect. (Wrong)

This was correct.