The average price Washburn charges for a guitar is $349.This price must cover its variable costs of $25 for direct materials and $120 in direct labor.It must also cover fixed expenses of $38,000.Assuming everything else stays the same,the company's planned move to Nashville,Tennessee,will reduce its fixed costs by $4,800.This would cause total costs to __________ and the break-even quantity to __________.
A)decrease;stay the same
B)decrease;increase
C)increase;increase
D)stay the same;increase
E)decrease;decrease

Question

Quizplus · Accepted Answer

The reduction in fixed costs by $4,800 will decrease total costs, and since fixed costs are lower, the break-even quantity will also decrease.

The Average Price Washburn Charges for a Guitar Is $349