Catamount Studios has budgeted the following amounts for its next fiscal year:

If Catamount Studios can reduce fixed expenses by $46,500,by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in units?

Question

Catamount Studios has budgeted the following amounts for its next fiscal year:

If Catamount Studios can reduce fixed expenses by $46,500,by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in units?

Quizplus · Accepted Answer

A)
Sales $40.00
Less Variable expenses 20.00
Contribution Margin $20.00
Fixed Exp $620,000 / 20 = 31,000 BE Units
Fixed expense reduction $46,500 / 31,000 BE Units = $18.50
Selling price per unit $40.00
Less Target Contribution Margin $18.50
Variable Expenses at new level $21.50
Less Old Variable Expenses $20.00
Change in Variable Expenses $1.50

Catamount Studios Has Budgeted the Following Amounts for Its Next