Questions -
Question 1 - The Park Co. has estimated a function that uses machine hours to predict factory maintenance costs. The function is cost = 12,000 + 24 x machine hours. Next month, Park expects to use 600 machine hours.
What is predicted maintenance cost?
a. $288,600
b. $26,400
c. $14,440
d. $2,400
Question 2 - Use this information to answer questions 2, 3, and 4. Greene Co. sold 50,000 units of product in 2015 for $12 each. Its total variable costs were $400,000 and total fixed costs were $120,000.
How much was Greene's contribution margin in 2015?
a. $80,000
b. $200,000
c. $520,000
d. $600,000
Question 3 - Suppose that the revenue and cost behavior in question 2 continues into 2016. How many units does Greene need to sell in order to break even in 2016?
a. 10,000 units
b. 20,000 units
c. 30,000 units
d. 100,000 units
Question 4 - Suppose that the behavior of revenues and variable costs remain the same as in question 2 during 2016, but fixed costs increase by $20,000 in 2016 compared to 2015. How would this change the breakeven point you computed in question 3?
a. Breakeven point would increase
b. Breakeven point would decrease
c. Breakeven point is unaffected