Consider a Small Firm That Is Producing Winter Jackets

question 46

Multiple Choice

Consider a small firm that is producing winter jackets.It can lease an additional sewing machine for one month for $1200.With this additional machine,the firm can produce an additional 7 jackets during that time period that it sells for $250 each.Hiring the marginal machine adds ________ to the firm's profit and so it should ________ the machine.

• A)-$1200; not lease
• B)$0; be indifferent as to whether to lease
• C)$1200; lease
• D)$550; lease
• E)$1750; lease

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Definitions:

Net Realizable Value

The estimated selling price of goods minus the cost of their sale or disposal, reflecting the actual cash value of inventory.

Accounts Receivable

The sum customers owe a corporation for goods or services delivered but not yet compensated.

Credit Balance

A situation in an account where the sum of credits exceeds the sum of debits.

Contra-Asset

An asset account where its balance is a negative figure, offsetting the balance of a related asset account.