Classic Loungers Is in the Process of Preparing a Production

question 118

Multiple Choice

Classic Loungers is in the process of preparing a production cost budget for August. Actual costs in July for 200 chaise lounge chairs were: $\begin{array}{lr}\text { Materials cost } & \$ 6,000 \\\text { Labor cost } & 8,000 \\\text { Rent } & 2,000 \\\text { Depreciation } & 4,000 \\\text { Other fixed costs } & 5,000 \\\text { Total } & \$ 25,000\end{array}$ Each chair is sold for $140 in July. The company plans to lower the selling price to $130 per chair at which management estimates that sales will increase to 230 chairs. Materials and labor are the only variable costs. Under what situation should the company lower the price of its chaise lounge chairs?

• A) If total revenue exceeds totals costs under the new pricing
• B) If incremental revenue exceeds the old revenue
• C) If incremental profit is a positive number
• D) If incremental costs decrease

Identifying the types of assets and differentiating between current and long-term assets.

Recognizing the components of owners' equity and its significance to a company.

Differentiating between types of liabilities on a balance sheet.

Understanding liquidity measures and their implications for a company's financial health.

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Definitions:

Moral Development

The process through which individuals learn and apply concepts of right and wrong behavior, guided by cultural, social, and ethical norms.

Ethical Issue

A situation or problem that requires individuals or organizations to choose between alternatives that must be evaluated as right or wrong (ethical or unethical).

Cheating

The act of being dishonest, breaking rules, or using deceptive means to gain an unfair advantage, typically within an academic or competitive setting.

Situational

Relating to or dependent upon a specific set of circumstances or context.