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    Break-even point/Net operating income

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    1. South Company sells a single product for $20 per unit. If variable expenses are 60% of sales and fixed expenses total $9,600, the break-even point will be:
    A. $24,000
    B. $14,400
    C. $9,600
    D. $16,000

    2. Arthur Company has a margin of safety percentage of 25%. The break-even point is $300,000 and the variable expenses are 45% of sales. Given this information, the net operating income is:
    A. $75,000
    B. $55,000
    C. $15,000
    D. $41,250

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    Solution Preview

    1. The contribution margin is 1-60%=40%. The contribution margin per unit is 20X40%=$8.
    Breakeven units = Fixed Cost/Contribution margin per unit = 9,600/8=1,200
    Breakeven Sales ...

    Solution Summary

    The solution explains the calculation of break-even point and net operating income