Question

Suppose that the ABC Corporation has a production (and sales) capacity of $1,000,000 per month. Its fixed costs—over a considerable range of volume—are $350,000 per month, and the variable costs are $0.50 per dollar of sales. a) What is the annual breakeven point volume (D')? b) What would be the effect on D' of decreasing the variable cost per unit by 25% if the fixed costs thereby increased by 10%? c) What would be the effect on D' if the fixed costs were decreased by 10% and the variable cost per unit were increased by the same percentage?

          Suppose that the ABC Corporation has a production (and sales) capacity of $1,000,000 per month. Its fixed costs—over a considerable range of volume—are $350,000 per month, and the variable costs are $0.50 per dollar of sales.

a) What is the annual breakeven point volume (D')?
b) What would be the effect on D' of decreasing the variable cost per unit by 25% if the fixed costs thereby increased by 10%?
c) What would be the effect on D' if the fixed costs were decreased by 10% and the variable cost per unit were increased by the same percentage?

Added by Sarah S.

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