You have been provided with the following information: If sales decrease by 500 units,how much will fixed expenses have to be reduced by to maintain the current operating profit of $6,000?
A)$9,000.
B)$7,500.
C)$6,000.
D)$3,000.

Question

Quizplus · Accepted Answer

To maintain the current operating profit, fixed expenses need to be reduced by the contribution margin lost from the decrease in sales. If the contribution margin per unit is $6 (since $6,000 profit is maintained with 1,000 units), then for 500 units, the reduction needed is 500 units x $6 = $3,000.

You Have Been Provided with the Following Information: If Sales