Your Company Plans to Produce a New Product,a Wireless Computer

question 38

Multiple Choice

Your company plans to produce a new product,a wireless computer mouse.Two machines can be used to make the mouse,Machines A and B.The price per mouse will be $25.00 regardless of which machine is used.The fixed and variable costs associated with the two machines are shown below.At the expected sales level of 30,000 units,how much higher or lower will the firm's expected EBIT be if it uses Machine B with high fixed costs rather than Machine A with low fixed costs,i.e. ,what is EBIT_B - EBIT_A ? $\begin{array}{lrr} & \text { Machine A } & \text { Machine B } \\\text { Price per mouse (P) } & \$ 25.00 & \$ 25.00 \\\text { Fixed costs (F) } & \$ 100,000 & \$ 400,000 \\\text { Variable costinit (V) } & \$ 17.00 & \$ 11.00 \\\text { Exp. unit sales (Q) } & 30,000 & 30,000\end{array}$
?

• A) -$102,000
• B) -$129,600
• C) -$93,600
• D) -$118,800
• E) -$120,000

---

Definitions:

Kleptomania

A psychiatric disorder characterized by an irresistible urge to steal items, typically without need or financial motive.

Paranoia

A mental condition characterized by delusions of persecution, unwarranted jealousy, or exaggerated self-importance, often without sufficient basis.

Generalized Anxiety Disorder

A mental health disorder characterized by persistent and excessive worry about various aspects of life, not limited to one specific issue.

Mania

A mental health condition marked by periods of great excitement or euphoria, delusions, and overactivity.