Answer:
Increase the production to decrease the fixed cost per unit
Explanation:
The reason is that if the production increases then the fixed cost will start decrease because the level of production and fixed cost per unit are inversely proportional to each other. Now if the production increases to 1250 ($500/0.4) units then the firm is at no profit and no loss position (Breakeven position). So all the firm has to do is increase its production above 1250 and generate the demand of increased production at the same price.
Answer:
b. retained earnings will be reduced by $8000
Explanation:
The journal entries are as follows:
Retained earning A/c Dr $8,000
To Dividend payable A/c $8,000
(Being the dividend is declared)
Dividend payable A/c Dr $8,000
To Cash A/c $8,000
(Being the dividend is paid in cash)
So at the time of dividend paid, the retained earnings got reduced by $8,000