Question : 5) Which of the following will increase a company’s breakeven : 1217153

5) Which of the following will increase a company’s breakeven point?

A) increasing variable cost per unit

B) increasing contribution margin per unit

C) reducing its total fixed costs

D) increasing the selling price per unit

6) Assume there is a reduction in the selling price and all other CVP parameters remain constant. This change will:

A) increase contribution margin

B) reduce fixed costs

C) increase variable costs

D) reduce operating income

7) Assume there is an increase in advertising expenditures and all other CVP parameters remain constant. This change will:

A) reduce operating income

B) reduce contribution margin

C) increase variable costs

D) increase selling price

8) Bassman Company operates on a contribution margin of 30% and currently has fixed costs of $400,000. Next year, sales are projected to be $2,000,000. An advertising campaign is being evaluated that costs an additional $60,000. How much would sales have to increase to justify the additional expenditure?

A) $120,000

B) $180,000

C) $200,000

D) $600,000

Answer the following questions using the information below:

Martha Manufacturing produces a single product that sells for $80. Variable costs per unit equal $32. The company expects total fixed costs to be $72,000 for the next month at the projected sales level of 2,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.

9) Suppose management believes that a $16,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by how much to justify this additional expenditure?

A) 200 units

B) 334 units

C) 500 units

D) None of these answers are correct.

10) Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented:

A) operating income will decrease by $8,000

B) operating income will increase by $8,000

C) operating income will decrease by $16,000

D) operating income will increase by $16,000

Answer the following questions using the information below:

Bush Manufacturing produces a single product that sells for $100. Variable costs per unit equal $25. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.

11) Suppose that management believes that a $24,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by how much to justify this additional expenditure?

A) 320 units

B) 1,120 units

C) 240 units

D) None of these answers are correct.

12) Suppose that management believes that a 20% reduction in the selling price will result in a 20% increase in sales. If this proposed reduction in selling price is implemented:

A) operating income will decrease by $9,000

B) operating income will increase by $9,000

C) operating income will decrease by $20,000

D) operating income will increase by $15,000

13) If contribution margin decreases by $1 per unit, then operating profits will increase by $1 per unit.

14) If variable costs per unit increase, then the breakeven point will decrease.