Partner Industries sells a single product for $50 that has a variable cost of $30.Fixed costs amount to $5 per unit when anticipated sales targets are met.If the company sells one unit in excess of its break- even volume, proﬁt will be:

Question

Quizplus · Accepted Answer

The break-even volume can be calculated by dividing total fixed costs by the contribution margin (selling price - variable cost):
Break-even volume = $5 / ($50 - $30) = 5 units

If the company sells one unit in excess of the break-even volume, it will sell a total of 6 units.
Total revenue will be 6 x $50 = $300
Total variable cost will be 6 x $30 = $180
Total fixed costs remain at $5 x 5 units = $25
Total profit will be:
$300 - $180 - $25 = $95
Since the company is selling one additional product for a contribution margin of $20 ($50 selling price - $30 variable cost), the profit will increase by this amount. The correct answer is therefore B) $20.

Partner Industries Sells a Single Product for $50 That Has