Cheesy Company

The Company is considering the introduction of a new product with the following price and cost characteristics

Sales price	$150 each
Variable cost	$60 each
Fixed cost	$135,000 per year

The company expects to sell 2,000 units for the year.

16. Refer Cheesy Company. How many units must be sold to break even?

a.	900
b.	2,250
c.	2,000
d.	1,500

17. What effect could an increase (investment) in fixed costs have on the break-even point and the contribution margin?

Break-even Point Contribution Margin

a.	Increase Increase
b.	Increase Decrease
c.	Decrease Increase
d.	Decrease Decrease

18. Calculate margin of safety using the following assumptions:

Sales Price per unit	$500
Variable cost per unit	$300
Fixed Costs in total	$200,000
Actual Sales Volume	1,750 units

a.	1,000 units
b.	$500,000
c.	1,750 units
d.	750 units

19. Which of the following is a typical cost structure for home builders?

a.	high fixed costs relative to variable costs.
b.	high variable costs relative to fixed costs.
c.	high profits relative to total costs.
d.	None of the answers is correct.