Use the Following to Answer Questions

question 225

Multiple Choice

Use the following to answer questions
Table: The HP Stock Exchange

-(Table: The HP Stock Exchange) The HP Stock Exchange lets members of HP's sales team buy and sell shares that pay off when sales fall within a certain range. A typical security would pay out $1, if and only if future sales fell within the specific range of that share. Accordingly, the trading price given in the table between 15,000 and 20,000 units implies that:

• A) price per unit of sales is $0.40 if the sales ranges between 15,000 and 25,000 units.
• B) price per unit of sales will increase at $0.40 per unit for sales between 15,000 and 20,000 units.
• C) the probability of selling between 15,000 and 20,000 units is believed to be 40%.
• D) the probability of selling between 15,000 and 20,000 is believed to be at least 40%.

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Definitions:

Amortization

The periodic transfer of the cost of an intangible asset to expense or of a bond discount to interest expense.

Prime Cost

The direct costs of manufacturing a product, which include the raw materials and direct labor expenses.

Plant Janitor's Wages

The wages paid to janitorial staff within a manufacturing plant, considered part of factory overhead costs.

Machine Operator Wages

Compensation paid to workers who operate machinery as part of the manufacturing process.