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Homework answers / question archive / Lewis Enterprises management has budgeted the following amounts for its next fiscal year:   Total fixed expenses $500,000 Selling price per unit $1,000 Variable expenses per unit $750   Requirements: a

Lewis Enterprises management has budgeted the following amounts for its next fiscal year:   Total fixed expenses $500,000 Selling price per unit $1,000 Variable expenses per unit $750   Requirements: a

Accounting

Lewis Enterprises management has budgeted the following amounts for its next fiscal year:

 

Total fixed expenses

$500,000

Selling price per unit

$1,000

Variable expenses per unit

$750

 

Requirements:

a.     If Lewis Enterprises can reduce fixed expenses by $25,000, how will breakeven sales in units be affected?

b.     If Lewis Enterprises spends an additional $1,000 on advertising, sales volume should increase by 1,000 units. What effect will this have on operating income?

c.     If Lewis Enterprises can reduce fixed expenses by $40,000, by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in units?

d.    If fixed expenses increase by 25%, to maintain the original breakeven sales in units, what would be the selling price per unit have to be?

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