Hanover Binding Plans to Produce 40,000 Books Next Year at a Total

question 78

Multiple Choice

Hanover Binding plans to produce 40,000 books next year at a total cost of $1,640,000 with a selling price per book of $66.00.The fixed costs total $280,000.Management is considering lowering the price to $60.00 per book, and feels that this action will cause sales to climb to 50,000 books.What will be the incremental costs incurred if 50,000 books are sold?

• A)$340,000
• B)$20,000
• C)$1,700,000
• D)$1,300,000

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Definitions:

Fixity

In economics, refers to the inelasticity or immobility of certain factors, like land or capital, which can limit responsiveness to changes in market conditions.

Long Run

A period of time sufficient for all adjustments to be made in an economy or market, considering all possible changes in production.

Average Costs

The total cost of production divided by the number of units produced, used to determine the average expense per unit.

Marginal Costs

The increase or decrease in the total cost that results from producing one more or one less unit of a good or service.