Stephanie Inc sells its product for 40 The variable costs are 18 per unit Fixed

Stephanie inc sells its product for 40 the variable

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138.Stephanie, Inc. sells its product for \$40. The variable costs are \$18 per unit. Fixed costsare \$16,000. The company is considering the purchase of an automated machine that willresult in a \$2 reduction in unit variable costs and an increase of \$5,000 in fixed costs.Which of the following is true about the break-even point in units? a.It will remain unchanged.b.It will decrease.c.It will increase.d.It cannot be determined from the information provided.Ans: C, LO: 7, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:Problem Solving, IMA: Quantitative MethodsSolution: \$16,000 / (\$40 \$18) 727; \$21,000 / (\$40 \$16) 875 FOR INSTRUCTOR USE ONLY 18 - 27
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition 139.How much sales are required to earn a target net income of \$160,000 if total fixed costsare \$200,000 and the contribution margin ratio is 40%? 140.The following monthly data are available for Lumberyard Company. which produces onlyone product: Selling price per unit, \$42; Unit variable expenses, \$14; Total fixed expenses,\$84,000; Actual sales for the month of June, 4,000 units. How much is the margin ofsafety for the company for June? 141.Danny’s Lawn Equipment has actual sales of \$800,000 and a break-even point of\$600,000. How much is its margin of safety ratio? 142.The following monthly data are available for Seasons Company which produces only oneproduct: Selling price per unit, \$42; Unit variable expenses, \$14; Total fixed expenses,\$84,000; Actual sales for the month of June, 5,000 units. How much is the margin ofsafety for the company for June? a.\$56,000b.\$84,000c.\$126,000d.\$2,000Ans: B, LO: 8, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:Problem Solving, IMA: Quantitative MethodsSolution: \$84,000 / (\$42 \$14) 3,000; 3000 \$42 \$126,000; \$126,000 (5000 \$42) \$84,000

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