Lester Co Produces Toys Kites

question 1

Multiple Choice

Lester Co. produces toys kites. It has a fixed cost of $62,150. If the selling price per unit is $9.50 and the variable cost per unit is $6.25, the breakeven point is:

• A)$9,207
• B)6,542
• C)22,600
• D)29,860
• E)None of these

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Definitions:

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a decrease in the per-unit cost as output increases.

Diseconomies of Scale

The situation in which the cost of producing each individual unit rises when a company's production volume grows, often resulting from inefficiencies and a rise in complexity.

Long-run Average Total Cost

The cost per unit of output in which all inputs, including capital, are variable, showing economies and diseconomies of scale over time.