Given the following data:
$$\begin{array} { | l | r | r | }
\hline&\text { Per Unit } & \text { Total }\
\hline \text { Sales } & \$ 15 & \$ 45,000 \
\hline \text { Less variable expenses } & \underline{ 9 }& \underline{27,000} \
\hline \text { Contribution margin } &6 & 18,000\
\hline \text { Less fixed expenses } & & \underline{12,000 } \
\hline \text { Operating profit } & &\$6,000\
\hline
\end{array}$$If sales decrease by 500 units,by what percent would fixed costs have to be reduced by to maintain current net income?
A) 50.0%.
B) 33.3%.
C) 25.0%.
D) 16.7%.

Question

Given the following data: 
$$\begin{array} { | l | r | r | } 
\hline&\text { Per Unit } & \text { Total }\
\hline \text { Sales } & \$ 15 & \$ 45,000   \
\hline \text { Less variable expenses } & \underline{ 9 }&  \underline{27,000} \
\hline \text { Contribution margin } &6 & 18,000\
\hline \text { Less fixed expenses } & & \underline{12,000 } \
\hline \text { Operating profit } & &\$6,000\
\hline
\end{array}$$If sales decrease by 500 units,by what percent would fixed costs have to be reduced by to maintain current net income?
A) 50.0%.
B) 33.3%.
C) 25.0%.
D) 16.7%.

Quizplus · Accepted Answer

If sales decrease by 500 units, the contribution margin would decrease by $3,000 (500 units * $6 per unit). To maintain the current net income of $6,000, fixed costs must be reduced by $3,000. The current fixed costs are $12,000, so the reduction needed is $3,000/$12,000 = 25.0%.

Given the Following Data If Sales Decrease by 500 Units,by What Percent Would Fixed