Asked by Chelsea Garcia-Perez on Jul 11, 2024
Verified
Last year, Perry Company reported profits of $4,200. Its variable expenses totalled $66,000 or $6 per unit. The unit contribution margin was $3.00. The break-even point in units for Perry Company is:
A) 22,000.
B) 9,600.
C) 11,000.
D) 12,400.
Break-Even Point
The production level or sales volume at which total revenues equal total expenses, with no net profit or loss.
Variable Expenses
Expenses that fluctuate in direct proportion to the amount of production or the volume of sales, including items like direct labor and raw materials.
Contribution Margin
The amount by which the sale of a product exceeds its variable costs, contributing to covering fixed costs and generating profit.
- Calculate and interpret the contribution margin per unit and contribution margin ratio.
- Capture the essence of and implement the concept of break-even analysis and leverage, along with the calculation and impact of the degree of operating leverage.
Verified Answer
Learning Objectives
- Calculate and interpret the contribution margin per unit and contribution margin ratio.
- Capture the essence of and implement the concept of break-even analysis and leverage, along with the calculation and impact of the degree of operating leverage.
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