Arthur Company had the following data for the year just ended:
$\begin{array}{|l|r|}
\hline \text { Sales } & 4,000 \text { units } \
\hline \text { Sales price } & \$ 60 \text { per unit } \
\hline \text { Variable cost } & \$ 18 \text { per unit } \
\hline \text { Fixed costs } & \$ 42,000 \
\hline
\end{array}$

-If the company's fixed costs decrease by 20% next year,all other factors remaining the same,by how much will the break-even level change compared to that of the current year,rounded to the nearest whole unit?
A) 200-unit increase.
B) 440-unit decrease.
C) 200-unit decrease.
D) No change in the break-even point.

Question

Arthur Company had the following data for the year just ended:
$\begin{array}{|l|r|}
\hline \text { Sales } & 4,000 \text { units } \
\hline \text { Sales price } & \$ 60 \text { per unit } \
\hline \text { Variable cost } & \$ 18 \text { per unit } \
\hline \text { Fixed costs } & \$ 42,000 \
\hline
\end{array}$

-If the company's fixed costs decrease by 20% next year,all other factors remaining the same,by how much will the break-even level change compared to that of the current year,rounded to the nearest whole unit?
A) 200-unit increase.
B) 440-unit decrease.
C) 200-unit decrease.
D) No change in the break-even point.

Quizplus · Accepted Answer

The original break-even point is 1,000 units. With a 20% decrease in fixed costs, the new break-even point is 800 units, resulting in a 200-unit decrease.

Arthur Company Had the Following Data for the Year Just