Accounting 9706 · AS & A Level · Costs and cost behaviour

Costs and cost behaviour — practice question

The data below are provided for a business. Planned sales each month: $500$ units Selling price for each unit: $\$30$ Variable cost for each unit: $\$24$ Planned fixed costs per month: $\$600$ The business intends to hire a machine that would raise monthly fixed costs to $\$2400$ and lower variable costs to $\$18$ per unit. What effect would this have on the business’s margin of safety?

  • Aincrease by $100$ units
  • Bincrease by $150$ units
  • Creduce by $100$ units
  • Dreduce by $150$ units

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