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28) The Dynamaco Company uses cost-plus pricing with a 50%
mark-up. The company is currently selling 100,000 units at $12 per
unit. Each unit has a variable cost of $6. In addition, the company
incurs $200,000 in fixed costs annually. If demand falls to 80,000
units and the company wants to continue to earn a 50% return, what
price should the company charge?

29) Which of the following statements about prices and profit is
true?
A. Higher prices always lead to higher profits.
B. Higher prices always lead to lower demand and lower profits.
C. Higher prices combine with lower demand to change the level of
profits.
D. Higher prices will be offset by lower demand so profits will
stay constant.

30) The TOTOM Company sells one product with a variable cost of $5
per unit. The company is unsure what price to charge in order to
maximize profits. The price charged will also affect the demand. If
fixed costs are $100,000 and the following chart represents the
demand at various prices, what price should be charged in order to
maximize profits?
Units Sold Price
30,000 $10
40,000 $9
50,000 $8
60,000 $7

31) Santa Company has $39 per unit in variable costs and $1,900,000
per year in fixed costs. Demand is estimated to be 138,000 units
annually. What is the price if a markup of 35% on total cost is
used to determine the price?

32) Sarker manufacturing company produces and sells 40,000 units of
a single product. Variable costs total $80,000 and fixed costs
total $120,000. If each unit is sold for $8, what markup percentage
is the company using. 

33) Customer profitability analysis might result in:
A. dropping some customers that are unprofitable.
B. lowering price or offering incentives to profitable
customers.
C. giving incentives to all customers to place orders online.
D. All of the above.

34) If a company is currently operating at its breakeven point,
which of the following statements is true? (Income tax
considerations are ignored)
A) If fixed costs increase, net income will decrease by the
contribution margin ratio times the amount of the increase in fixed
costs.
B) If sales increase by 20%, net income will also increase by 20%,
assuming that fixed costs are not equal to zero.
C) If variable costs double, net income will decrease by 50%.
D) Net income will decrease by the decrease in number of units sold
times the contribution margin per unit.

35) Which of the following situations would most likely violate
cost-volume-profit assumptions about fixed costs?
A) When production volume increases beyond the capacity of the
plant, a second shift will be added instead of building a new
plant.
B) As volume decreases, per unit fixed manufacturing overhead
remains constant.
C) The company’s raw material supplier typically allows volume
discounts when larger amounts of the raw material are
purchased.
D) Fixed costs per unit decrease as volume increases.

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