Pima,IncManufactures Calculators That Sell for $40 Each

question 14

Multiple Choice

Pima,Inc.manufactures calculators that sell for $40 each.Each calculator uses $15 in direct materials and $5 in direct labor per unit.Pima has two activities: Machining,which is applied at the rate of $4 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Pima made 400 calculators,using 1,000 machine hours in 40 batches.What is the gross profit for one calculator?

• A)$8
• B)$20
• C)$25
• D)$35

---

Definitions:

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 means the stock is more volatile than the market, while a beta below 1 means it is less volatile.

CAPM

The Capital Asset Pricing Model, a theory used to determine the expected return on investment based on its inherent risk and the cost of capital.

Expected Return

The anticipated profit or loss from an investment based on its potential risks and rewards.

SML

The Security Market Line (SML) represents the relationship between the expected return of a market security and its risk, measured by beta, within the Capital Asset Pricing Model (CAPM).