You have been provided with the following information:
$$\begin{array} { | l | r | r | }
\hline&\text { Per Unit } & \text { Total }\
\hline \text { Sales } & \$ 15 & \$ 45,000 \
\hline \text { Less variable expenses } & \underline{ 9 }& \underline{27,000} \
\hline \text { Contribution margin } &6 & 18,000\
\hline \text { Less fixed expenses } & & \underline{12,000 } \
\hline \text { Operating profit } & &\$6,000\
\hline
\end{array}$$
If unit sales decrease by 10%,how much will fixed costs have to be reduced by to maintain the current operating profit?
A) $12,000.
B) $4,500.
C) $6,000.
D) $1,800.

Question

You have been provided with the following information: 
$$\begin{array} { | l | r | r | } 
\hline&\text { Per Unit } & \text { Total }\
\hline \text { Sales } & \$ 15 & \$ 45,000   \
\hline \text { Less variable expenses } & \underline{ 9 }&  \underline{27,000} \
\hline \text { Contribution margin } &6 & 18,000\
\hline \text { Less fixed expenses } & & \underline{12,000 } \
\hline \text { Operating profit } & &\$6,000\
\hline
\end{array}$$
If unit sales decrease by 10%,how much will fixed costs have to be reduced by to maintain the current operating profit?
A) $12,000.
B) $4,500.
C) $6,000.
D) $1,800.

Quizplus · Accepted Answer

A 10% decrease in unit sales reduces the contribution margin by $1,800 (10% of $18,000). To maintain the current operating profit, fixed costs must be reduced by this amount.

You Have Been Provided with the Following Information If Unit Sales Decrease by 10%,how Much Will Fixed Costs