Phillips & Company produces educational software. Its unit cost structure, based upon an anticipated production volume of 150,000 units, is as follows.
The marketing department has estimated sales for the coming year at 175,000 units, which is within the relevant range of Phillips's cost structure. Phillips has an opportunity to adopt a new structure for the coding of its software that will increase variable costs per unit to $66.25, but at the same time allow the company to reduce unit fixed costs to $50. These changes to the cost structure would have no impact on selling price or anticipated sales. If the changes are made, the new breakeven point and anticipated operating income for the coming year amount to:
A) 80,000 units and $8,906,250 of operating income.
B) 80,000 units and $7,656,250 of operating income.
C) 96,250 units and $8,906,250 of operating income.
D) 96,250 units and $7,656,250 of operating income.

Question

Phillips & Company produces educational software. Its unit cost structure, based upon an anticipated production volume of 150,000 units, is as follows.
 The marketing department has estimated sales for the coming year at 175,000 units, which is within the relevant range of Phillips's cost structure. Phillips has an opportunity to adopt a new structure for the coding of its software that will increase variable costs per unit to $66.25, but at the same time allow the company to reduce unit fixed costs to $50. These changes to the cost structure would have no impact on selling price or anticipated sales. If the changes are made, the new breakeven point and anticipated operating income for the coming year amount to:
A) 80,000 units and $8,906,250 of operating income. 
B) 80,000 units and $7,656,250 of operating income. 
C) 96,250 units and $8,906,250 of operating income. 
D) 96,250 units and $7,656,250 of operating income.

Quizplus · Accepted Answer

The Answer of   Phillips & Company produces educational software. Its unit cost structure, based upon an anticipated production volume of 150,000 units, is as follows.
 The marketing department has estimated sales for the coming year at 175,000 units, which is within the relevant range of Phillips's cost structure. Phillips has an opportunity to adopt a new structure for the coding of its software that will increase variable costs per unit to $66.25, but at the same time allow the company to reduce unit fixed costs to $50. These changes to the cost structure would have no impact on selling price or anticipated sales. If the changes are made, the new breakeven point and anticipated operating income for the coming year amount to:
A) 80,000 units and $8,906,250 of operating income. 
B) 80,000 units and $7,656,250 of operating income. 
C) 96,250 units and $8,906,250 of operating income. 
D) 96,250 units and $7,656,250 of operating income.

Phillips & Company Produces Educational Software