Question

Knowledge Check 01 Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. Compute the profit from the sale of 100 bicycles $12,000 $10,000 $20,000 $8,000 Knowledge Check 02 Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle? O $500 $300 O $200 $20,200

Knowledge Check 03

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.

• unit contribution margin

• unit selling price

• variable expense per unit

• fixed expense per unit

Knowledge Check 04

Break-even point is the level of sales at which ______.

• total profits equals total costs

• total profits exceed total costs

• total revenue equals total costs

• total sales equal total projections

Answer 1

1.

Total contribution margin = Number of bicycles sold x Contribution margin per bicycle = 100 x $200 = $20,000

Fixed expenses for the month = $8,000

Therefore,

Profit from sale of 100 bicycles = Total contribution margin - Fixed expenses = $20,000 - $8,000 = $12,000

2.

Contribution margin per bicycle = Selling price per bicycle - Variable costs per bicycle = $500 - $300 = $200

Because fixed expenses do not increase of decrease with the increase or decrease in the number of units sold, the increase in profit from additional sale of one unit is always equal to the contribution margin per unit.

Therefore, the answer is $200.

3.

Once the break-even point has been reached, net operating income will increase by the amount of the unit contribution margin for each additional unit sold.

4.

Break-even point is the level of sales at which total revenue equals total costs.