D is corrent. The equation for computing operating income is as follows:
Revenues – Variable costs – Fixed costs = Operating Income
Revenue is equal to the sales price, $20, multiplied by x, the unknown amount of units it takes to reach the breakeven point. Variable costs include variable manufacturing overhead, variable selling and administrative costs, as well as the prime cost per unit multiplied by the unknown. Fixed costs, which amount to $450,000, are found by multiplying unit fixed costs by the amount of units sold at annual sales of $900,000, which equal 45,000 units ($900,000/$20). Operating income at breakeven point is 0.
Applying this equation, we get
A is incorrect. Breakeven is equal to 37,500.
A is incorrect. Breakeven is equal to 37,500.
A is incorrect. Breakeven is equal to 37,500.
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