At a break-even point of 800 units sold,White Company's variable expenses are $8,000 and its fixed expenses are $4,000.What will the company's operating income be at a volume of 801 units?

Question

Quizplus · Accepted Answer

At break-even point, the company's revenue equals its total expenses. Therefore, the revenue at a volume of 800 units would be:

800 units x price per unit = $8,000 + $4,000

price per unit = ($8,000 + $4,000) / 800 units = $15 per unit

At a volume of 801 units, the revenue would be:

801 units x $15 per unit = $12,015

The variable expenses for 801 units would be:

801 units x $8 variable expenses per unit = $6,408

The fixed expenses would remain the same at $4,000. Therefore, the operating income would be:

$12,015 - $6,408 - $4,000 = $1,607

This is a positive operating income, which means the company is making a profit. The increase in volume from 800 to 801 units results in an increase in operating income of $1,607 - $0 = $1,607. Therefore, the answer is C, $5.

At a Break-Even Point of 800 Units Sold,White Company's Variable