Zipco Is in Serious Negotiations to Purchase a Chunking Machine

question 5

Multiple Choice

Zipco is in serious negotiations to purchase a chunking machine that will enable them to perform their own chunking at $1 per unit.They currently have their chunking outsourced at a cost of $1.50 per unit and a fixed cost of $45,000.Their marketing team feel that they can sustain an annual volume of 10,000 units.What is the maximum fixed cost that Zipco should be willing to bear in order to perform their own chunking?

• A) $50,000
• B) $45,000
• C) $40,000
• D) $35,000

---

Definitions:

Reinforcement

In psychology and organizational behavior, the process of encouraging or establishing a pattern of behavior by offering rewards or consequences.

Immediately

Refers to something happening without delay or instantly.

Continuously

Ongoing without interruption or cease, typically used to describe processes or operations that do not stop or pause.

Partially

To some extent but not completely; involving only a part or portion.