Question

Which of the following are true in a cost-volume-profit graph: An increase in the unit selling price would shift the break even sales point to the left An increase in unit variable costs would decrease the slope of the total costs line An increase in the unit selling price would shift the break-even sales point to the right All of the answers are correct QUESTION 4 Watson Company sells its product for $10 a unit. Next year, fixed expenses are expected to be $200,000 and variable expenses are estimated at $5 per unit. How many units must Watson sell to generate net operating income of $50,000? 60,000 units 100,000 units 62,500 units 50,000 units

Answer 1

4.

Selling price per unit = $10

Variable cost per unit = $5

Fixed expenses = $200,000

Contribution margin per unit= Selling price per unit- Variable cost per unit

= 10-5

= $5

Units to earn target income = (Fixed cost + Target income)/ Contribution margin per unit

= (200,000+50,000)/5

= 250,000/5

= 50,000 units

50,000 units sell to generate net operating income of $50,000.

Fourth option is correct.

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