The Draper Corporation Is Considering Dropping Its Doombug Toy Due

question 151

Multiple Choice

The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow: If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable.
Assuming all other conditions stay the same, at what level of annual sales of Doombugs (in units) should Draper be indifferent between discontinuing Doombugs or continuing the production and sale of Doombugs?

• A) 20,000 units
• B) 18,000 units
• C) 6,000 units
• D) 4,000 units

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Definitions:

Poisson Distribution

A probability distribution that measures the probability of a given number of events happening in a fixed interval of time or space.

Probability Distribution

A function in mathematics that calculates the probability of each possible result of an experiment.

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A group of players forming one side in a competitive game of soccer.