M Studios retails their own brand of camera that they manufacture in their plant for $500. The plant capacity is 1,000 units per month and variable costs are $225 per camera. Total fixed costs for the year are $2.16 million. If fixed costs increase by 10%, how many cameras per month would have to be sold to maintain a net income of $49,500?
A) 950 units
B) 875 units
C) 850 units
D) 925 units
E) 900 units

Question

Quizplus · Accepted Answer

First, calculate the new fixed costs after a 10% increase: $2.16 million * 1.10 = $2.376 million annually, or $198,000 monthly. To maintain a net income of $49,500, total costs (fixed + variable) must be covered. The contribution margin per camera is $500 - $225 = $275. The break-even point in units is calculated as (Fixed Costs + Desired Net Income) / Contribution Margin per Unit = ($198,000 + $49,500) / $275 = 900 units.

M Studios Retails Their Own Brand of Camera That They