Answer (B) is correct . Operating income increased by $200,000 when the sales volume exceeded the BEP by 25,000 units. This increase in profit is a result of an increase in the contribution margin (sales – variable costs). Unit contribution margin is $8 ($200,000 ÷ 25,000 units). The BEP in units is equal to fixed costs divided by the UCM. Fixed costs ÷ UCM = BEP Fixed costs ÷ $8 = $75,000 ,Fixed costs = $600,000
Answer (A) is incorrect because The contribution margin of sales of 100,000 units is $800,000.
Answer (C) is incorrect because The annual fixed costs are determined by finding the UCM ($200,000 profit ¡Â 25,000 increase in units over breakeven point) and multiplying it by the number of units at the breakeven point.
Answer (D) is incorrect because There is sufficient information to determine the amount of fixed costs. The annual fixed costs are determined by finding the UCM ($200,000 profit ¡Â 25,000 increase in units over breakeven point) and multiplying it by the number of units at the breakeven point. |
