Slick Shades Has a Constant Marginal Cost of Production Equal

question 79

Multiple Choice

Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds) and charging the profit- maximizing wholesale price, what is Slick Shades' profit (in hundreds) ?

• A)$6,400
• B)$7,200
• C)$5,600
• D)$8,000

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Definitions:

Joint Production Costs

Costs incurred in the process where two or more products are produced together and the costs cannot be readily assigned to individual products.

Contribution Margin

A measure of profitability calculated as sales revenue minus variable costs; used to evaluate a product's contribution to covering fixed costs.

Machine Hour

A measure of production time or operation, calculated as the total hours a machine is run in the production process.

Net Realisable Value Method

A valuation method where the estimated selling price of goods is reduced by the completion and disposal costs.