The following information pertains to Gemini Company's cost-volume-profit relationships:
Break-even point in units sold 1,500
Variable costs per unit $ \$ 700 $
Total fixed costs $ \$ 225.000 $

How much will be contributed to profit before taxes by the 1,501st unit sold?
A)$850
B)$700
C)$150
D)$0

Question

The following information pertains to Gemini Company's cost-volume-profit relationships:
Break-even point in units sold                        1,500
Variable costs per unit                                    $ \$ 700 $
Total fixed costs                                            $ \$ 225.000 $

How much will be contributed to profit before taxes by the 1,501st unit sold?
A)$850
B)$700
C)$150
D)$0

Quizplus · Accepted Answer

The contribution margin of the 1,501st unit sold is the selling price per unit minus the variable cost per unit. Since fixed costs are covered by the first 1,500 units (break-even point), the entire contribution margin of the 1,501st unit will contribute to profit. However, the exact selling price per unit is not provided, but we can calculate the contribution margin per unit using the information given. The break-even point is reached when total revenue equals total costs (variable costs plus fixed costs). At the break-even point of 1,500 units, the total revenue covers all costs. Therefore, the contribution to profit before taxes by the 1,501st unit sold is the amount over the variable cost, which is not directly given but implied to be positive. Without the selling price, we cannot calculate the exact amount, but we know it contributes more than the variable cost per unit. The correct answer relies on understanding that each unit sold beyond the break-even point contributes to profit, but without specific revenue data, a precise numerical answer cannot be determined from the options provided. The explanation mistakenly assumed a specific contribution margin could be calculated directly from the given choices.

The Following Information Pertains to Gemini Company's Cost-Volume-Profit Relationships: Break-Even $700 \$ 700 $700

The Following Information Pertains to Gemini Company's Cost-Volume-Profit Relationships:
Break-Even $\$ 700$