Question

Gulph Company reported the following results from the sale of 5,000 hammers in May: sales $200,000, variable costs $120,000, fixed costs $60,000, and net income $20,000. If Gulph increases the selling price of hammers by 10% on June 1, then ________ hammers will have to be sold in June to maintain the same level of net income. A : 4,300 B : 5,000 C : 4,500 D : 4,000

Answer 1

The correct answer is D.

Step-by-step explanation:

Giving the following information:

Gulph Company reported the following results from the sale of 5,000 hammers in May: sales $200,000, variable costs $120,000, fixed costs $60,000, and net income $20,000.

Selling price= 200,000/5000= $40

New selling price= $44

Unitary variable cost= 120,000/5,000= $24

Break-even point= (fixed costs + profit) / contribution margin

Break-even point= (60,000 + 20,000) / (44 -24)

Break-even point= 4000 units