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

Costs and cost behaviour — practice question

A company gives the information below for one year: - sales: $\$400\,000$ - total variable costs: $\$240\,000$ - total contribution: $\$160\,000$ - total fixed costs: $\$100\,000$ - profit for the year: $\$60\,000$ The company intends to raise the sales volume by $20\%$ by cutting the selling price by $10\%$. Total fixed costs and variable cost per unit will stay the same. What will be the change in profit for the year?

  • A$8\%$ increase
  • B$10\%$ decrease
  • C$21.33\%$ increase
  • D$26.67\%$ decrease

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