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Two Firms, a and B, Both Produce Widgets

question 41

Multiple Choice

Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable costs of 50¢ per widget. Firm B has total fixed costs of $240,000 and variable costs of 75¢ per widget. The corporate tax rate is 40%. If the economy is strong, each firm will sell 1,200,000 widgets. If the economy enters a recession, each firm will sell 1,100,000 widgets. If the economy enters a recession, the after-tax profit of Firm B will be

Apply accounting principles to record stock conversions in financial statements.

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Definitions:

Spending Variance

The difference between the actual amount spent and the budgeted amount for any category of expenses over a specific period.

Jobs

In accounting and manufacturing, specific units or batches of work that can be individually costed and tracked.

Administrative Expenses

Costs related to the general operation of a business, which are not directly tied to production or sales, such as salaries of administrative personnel and office supplies.

Patient-Visits

The number of individual patient encounters with healthcare providers, often used as a measure in medical and dental practices.