Walton, Inc

question 7

Multiple Choice

Walton, Inc.is unsure of whether to sell its product assembled or unassembled.The unit cost of the unassembled product is $16, while the cost of assembling each unit is estimated at $17.Unassembled units can be sold for $55, while assembled units could be sold for $71 per unit.What decision should Walton make?

• A)Sell before assembly; the company will save $1 per unit.
• B)Sell before assembly; the company will save $15 per unit.
• C)Process further; the company will save $1 per unit.
• D)Process further; the company will save $16 per unit.

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Definitions:

Short Payback Period

A time frame in which an investment is expected to be recovered quickly, indicating potential attractiveness.

Revenue

The cumulative earnings generated by a business from sales of products or offering of services over a designated period.

Break-Even Time

The period required for financial returns to cover the initial investment or costs, reaching a point where no profit or loss is incurred.

Payback Method

The payback method is a capital budgeting technique that calculates the time required to recoup the cost of an investment, focusing on cash flow and ignoring the time value of money.