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Problem 1: A company has sales of $87,500 at the break-even point and fixed costs are $35,000. Assuming cost behaviour does not change if sales increase by $20,000 how much will operating income will increase by?
Select one:
a. $4,000.00.
b. $8,000.00.
c. $12,000.00.
d. $20,000.00.
Problem 2: When interpreting a CVP graph which of the following is NOT correct?
a. When sales are below the breakeven intersection the company incurs a loss.
b. The total revenue line starts at the origin.
c. The breakeven point is where the total revenue line meets the fixed cost line.
d. The anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line and the total expense line.
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