Martha Manufacturing Product

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. (Each situation is to be evaluated separately).

Given this data, what will be the Operating Income next month?

Selected Answer: 24000

Correct Answer: 24000

Answer range +/- 0 (24000 - 24000)

Feedback: TR (2000 units @ $80/ea) = $160,000

VC (2000 units @ $32/ea) = $64,000

.:. CM = $96,000

Less FC of $72,000

= Operating Income of $24,000 per month

Question 2 10 out of 10 points

What is the current breakeven point per month in terms of number of units?

Selected Answer: 1500

Correct Answer: 1500

Answer range +/- 0 (1500 - 1500)

Feedback: SPu= $80

VCu = $32

.:. CMu = $48

Fixed Costs = 72,000/mo

BEu: FC ÷ CMu = $72,000 ÷ 48 = 1,500

Question 3 10 out of 10 points

Management believes that a 10% reduction in the selling price will result in increased sales. If they reduce the selling price by 10%, what will be the new break even unit volume per month?

Selected Answer: 1800

Correct Answer: 1800

Answer range +/- 0 (1800 - 1800)

Feedback: SPu= was $80; reduced by 10%, or $8, the new SPu - $72

VCu = $32 (unchanged)

.:. the new CMu = $40 (72-32)

Fixed Costs = 72,000/mo

BEu: FC ÷ CMu = $72,000 ÷ 40 = 1,800

Question 4 10 out of 10 points

If Martha sells one more unit than break-even next month, what will the Operating Income be?

Selected Answer: 48

Correct Answer: 48

Answer range +/- 0 (48 - 48)

Feedback: Once a company achieves break-even volume, every additional unit above break-even will increase Operating Income by the CMu, in this case $48 (because all Fixed Costs have been "covered").

Question 5 10 out of 10 points

Management believes that a $16,000...