"Carla, If Instead of Spending the $20,000 You're Asking Us

question 85

Multiple Choice

"Carla, if instead of spending the $20,000 you're asking us to put into this new advertising idea, we put that money in a new packaging machine to replace the one in the Cartersville plant, we'll save $3,500 annually in maintenance and utility costs." The buyer is basing this objection on:

• A)sunk costs.
• B)net present value.
• C)opportunity costs.
• D)payback period.
• E)all of the above

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Definitions:

Sales Volume

The total number of units or products sold within a specific period.

Fixed Expense

Overheads that stay the same, no matter how much is produced or sold, encompassing charges such as property rent, staff paychecks, and insurance coverage costs.

Break-Even

Break-even refers to the point at which total costs and total revenues are exactly equal, resulting in neither profit nor loss.

Variable Expense

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.