Question

# Highway 55 Studios has budgeted the following amounts for its next fiscal​ year: Total fixed expenses...

Highway 55 Studios has budgeted the following amounts for its next fiscal​ year:

 Total fixed expenses \$1,400,000 Selling price per unit \$60 Variable expenses per unit \$20

If Highway 55 Studios can reduce fixed expenses by \$43,750​, by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in​ units?

A.\$20.00

B.\$21.25

C.\$41.25

D.\$ 18.75

 Current : contribution margin per unit = Selling price - Variable cost = 60-20 40 break-even point = Fixed cost / contribution margin per unit = 1400000/40 35000 Revised : Fixed cost = 1400000-43750 1356250 break-even point = Fixed cost / contribution margin per unit 35000 = 1356250 / contribution margin per unit contribution margin per unit = 1356250 / 35000 38.75 contribution margin per unit = Selling price - Variable cost 38.75 = 60 - Variable cost Variable cost = 60 - 38.75 21.25 Answer : 21.25

#### Earn Coins

Coins can be redeemed for fabulous gifts.