Reference: 12-03
the Axle Division of LaBate Company Makes and Sells

question 83

Multiple Choice

Reference: 12-03
The Axle Division of LaBate Company makes and sells only one product. Annual data on the Axle Division's single product follow: $$\begin{array} { | l | l | } \hline \text { Unit selling price } & \$ 50 \\\hline \text { Unit variable cost } & \$ 30 \\\hline \text { Total fixed costs } & \$ 200,000 \\\hline \text { Average operating assets } & \$ 750,000 \\\hline \text { Minimum required rate of return } & 12 \% \\\hline\end{array}$$
-Suppose the manager of the Axle Division desires an annual residual income of $45,000. In order to achieve this, Axle should sell how many units per year?

• A)19,500.
• B)18,250.
• C)16,750.
• D)14,500.

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Definitions:

Psychological Reactance Theory

A motivational theory proposing that when people feel their freedom to choose is being limited, they are motivated to regain that freedom.

Regulatory Fit

A state of congruence or compatibility between an individual's regulatory orientation (e.g., promotion or prevention focus) and the task or goal at hand.

Increased Awareness

A heightened state of knowledge, consciousness, or understanding about a particular issue, phenomenon, or aspect of one's environment or self.

Mortality

The state of being subject to death; often used in statistics to refer to the rate of death within a population.