Question
Kiley Inc. sells its product at $12 per unit. For the relevant range of between 0 and 20,000 units, Kiley has fixed costs of $1,200
Kiley Inc. sells its product at $12 per unit. For the relevant range of between 0 and 20,000 units, Kiley has fixed costs of $1,200 and its variable costs exhibit economies of scale (in other words, the slope of the variable cost curve decreases as quantity increases). Contribution margin (revenue minus variable costs) is negative when the company sells less than 5,000 units, zero when the company sells 5,000 units, and positive when the company sells more than 5,000 units. Which of the following statements are true regarding Kiley's cost structure and CVP graph? Select all that apply. (Note, it may help to draw out a graph that describes this information.)
A. Breakeven point in sales is $60,000. B. The variable cost curve intersects the revenue curve at 5,000 units. C. Total variable cost decreases as quantity increases. D. Cost per unit decreases as quantity increases.
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