At a break-even point of 800 units sold, White Corporation's variable expenses are $8,000 and its fixed expenses are $4,000. What will the Corporation's net operating income be at a volume of 801 units?
A)$15
B)$10
C)$5
D)$20

Question

Quizplus · Accepted Answer

At the break-even point, total revenue equals total expenses (variable + fixed). Selling one more unit (801st unit) will generate additional revenue equal to the contribution margin per unit. The contribution margin per unit is the selling price per unit minus variable cost per unit. Since variable expenses for 800 units are $8,000, the variable cost per unit is $10 ($8,000/800). The contribution margin per unit is $5 (since fixed expenses are $4,000, the total revenue at break-even is $12,000, so the selling price per unit is $15, and $15 - $10 = $5). Therefore, the net operating income for selling 801 units is $5.

At a Break-Even Point of 800 Units Sold, White Corporation's