Calculator Company Proposes to Invest $5 Million in a New

question 55

Multiple Choice

Calculator Company proposes to invest $5 million in a new calculator making plant. Fixed costs are $2 million a year. A calculator costs $5/unit to manufacture and can be sold for
$20/unit. If the plant lasts for 3 years and the cost of capital is12%, what is the approximate break-even level of annual sales? (Assume no taxes.) (approximately)

• A) $133,333 units
• B) $272,117 units
• C) $227,533 units
• D) None of the above

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Definitions:

Market Participants

Individuals or entities engaging in the buying, selling, or exchange of goods and services in a market.

Standardized

Established to have uniform procedures, dimensions, materials, or tests, to ensure consistency and comparability across different entities or products.

Economic Profits

The excess of total revenue over total costs, including both explicit and implicit costs, in economics.

Market Supply

The total amount of a good or service that producers are willing and able to sell at varying price points, at a given time.