Vandelay Industries Manufactures a Range of Latex Products

question 44

Multiple Choice

Vandelay Industries manufactures a range of latex products. Vandelay recently purchased new equipment to manufacture latex gloves for the medical community. The new machinery leases for $70,000 annually and can produce 10,000 pairs of gloves each day. The raw latex material for each pair of gloves costs $.03 and Vandelay sells the gloves at a wholesale price of $.10 a pair. Currently, sales are 2,500,000 annually. What impact would a $.01 reduction in variable cost have on overall profit?

• A) Increase in profit of $25,000
• B) Decrease in profit of $25,000
• C) Increase in profit of $200,000
• D) Increase in profit of $15,000

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Definitions:

Abstract Thought

The ability to think about objects, principles, and ideas that are not physically present, involving complex processing of concepts rather than concrete objects.

Mental Categories

The classifications of cognitive information into organized groups in the brain, facilitating understanding and memory.

Simultaneously

Occurring, existing, or done at the same time as something else, indicating a concurrent action or event.

Number System

A mathematical system for representing and working with numbers, such as the decimal or binary systems.