Question
1) Nonesuch Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses
1) Nonesuch Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales.
What is the new break-even point in units for Nonesuch Company when the selling price is $6.00?
a 10,000 units
b 20,000 units
c 4,000 units
d 6,667 units
2)
Bugatti, Inc. decided to institute an advertising campaign that would cost $75,000. Variable costs will remain at $15 per unit. Bugatti is currently selling 100,000 units of its product at $25 per unit. The marketing department is estimating that there will be a 10 percent increase in sales volume. With all else remaining the same, what will be the result of this decision?
An increase in sales of $25,000 | |
A decrease in operating income of $75,000 | |
An increase in operating income of $25,000 | |
none of the above |
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