Use the Table for the Question(s)below

question 52

Multiple Choice

Use the table for the question(s) below.
Consider the following prices from a McDonald's Restaurant:
-A McDonald's Big Mac Extra Value Meal® consists of a Big Mac Sandwich,Large Coke,and a Large Fry.Assuming that there is a competitive market for McDonald's food items,at what price must a Big Mac value meal sell to ensure the absence of an arbitrage opportunity and uphold the law of one price?

• A)$4.08
• B)$4.38
• C)$5.47
• D)$5.77

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Definitions:

Markup Percentage

A measure of the difference between the cost of a product and its selling price, expressed as a percentage of the cost.

Product Cost

The total costs incurred in the production of a product, typically including direct materials, direct labor, and manufacturing overhead.

Target Cost

The desired cost of a product that is determined by subtracting a desired profit margin from a competitive market price.

Product Cost Concept

The idea that all costs incurred to create a product, including direct labor, materials, and manufacturing overhead, are assigned to products.