Question

Elk Manufacturing has budgeted the following amounts for its next fiscal​ year: Total fixed expenses ​$425,000 Selling price per unit ​$80 Variable expenses per unit ​$20 To maintain the original breakeven sales in units if fixed expenses were to increase by​ 20%, the selling price per unit would have to be A. increased by​ 15.00%. B. increased by​ 65.00%. C. decreased by​ 65.00%. D. decreased by​ 15.00%.

Answer 1

--Correct Answer = Option 'A' Increased by 15%

--Working #1

A	Sales Price per unit	$80
B	Variable expense per unit	$20
C = A - B	Contribution margin per unit	$60
D	Fixed Expenses	$425,000
E = C/D	Breakeven point	7083.333333

--Working #2 for answer

A	New Fixed expense	$510,000
B	Break Even units required	7083.333333
C = A/B	Contribution margin per unit	$72
D	Variable expense per unit	$20
E = C+D	New Selling price	$92
F	Old Selling Pirce	$80
G = E - F	Increase in Selling Price	$12
H = (G/F) x 100	% Increase in selling price	15%