Assume Unicorn Company has the following information available:
$\begin{array} { l }
\text {Selling price per unit }&\$100\
\text { Variable cost per unit }&\$45\
\text { Fixed costs per year}&\$420,000\
\text { Expected sales per year}&20,000 \text { units }\
\end{array}$

If variable costs increase to $65 per unit,what is the expected net income for one year?
A) $280,000
B) $700,000
C) $880,000
D) $1,580,000

Question

Assume Unicorn Company has the following information available:
$\begin{array} { l  }
 \text {Selling price per unit }&\$100\
 \text { Variable cost per unit }&\$45\
 \text { Fixed costs per year}&\$420,000\
 \text { Expected sales per year}&20,000 \text { units }\
\end{array}$

If variable costs increase to $65 per unit,what is the expected net income for one year?
A) $280,000
B) $700,000
C) $880,000
D) $1,580,000

Quizplus · Accepted Answer

With variable costs increasing to $65 per unit, the contribution margin per unit becomes $100 - $65 = $35. Expected sales are 20,000 units, so total contribution margin is 20,000 units * $35 = $700,000. Subtracting fixed costs of $420,000 from this gives a net income of $280,000.

Assume Unicorn Company Has the Following Information Available If Variable Costs Increase to $65 Per Unit,what Is the l