Refer to Scenario 9

question 168

Multiple Choice

Refer to Scenario 9.4 below to answer the question(s) that follow.
SCENARIO 9.4: Sponsors invest $100,000 in a new deli on the promise that they will earn a return of 10% per year on their investment. The deli sells 52,000 sandwiches per year. The deli's fixed costs include the return to investors and $42,000 in other fixed costs. Variable costs consist of wages ($1,000 per week) plus materials, electricity, etc. ($2,000 per week) . The deli is open 52 weeks per year.
-Refer to Scenario 9.4. The annual total costs of the deli are

• A) $42,000.
• B) $52,000.
• C) $156,000.
• D) $208,000.

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Definitions:

Defined Contribution Plans

Pension plans in which the employer is committed to making contributions according to a fixed formula.

Defined Contribution Plan

A retirement plan where an employer, employee, or both make contributions on a regular basis, with future benefits dependent on investment performance.

Risk-free Return

The theoretical return on an investment with no risk of financial loss, typically associated with government bonds.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, used in finance to gauge the return volatility of an investment.