Question 1
If a company is planning to reduce the selling price, they must believe that ________.
◦ variable costs will decline as well
◦ the fixed costs will cover the lower sales price
◦ more units will be sold
◦ increased collections will increase income
Question 2
Tony Manufacturing produces a single product that sells for $100. Variable costs per unit equal $45. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 3,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. Suppose management believes that a $85,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure?
◦ 850 units
◦ 1,546 units
◦ 1,412 units
◦ 1,419 units
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