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

Costs and cost behaviour — practice question

One firm makes only a single product. The information for one month is shown below. budgeted sales quantity: 200 units selling price per unit: $40 variable cost per unit: $24 budgeted monthly fixed costs: $800 The business intends to hire a machine, which would raise monthly fixed costs by $1200 to $2000 and lower variable costs to $20 per unit. How would this affect the margin of safety?

  • Adecrease by 50 units
  • Bdecrease by 90 units
  • Cincrease by 50 units
  • Dincrease by 90 units

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