Senate Inc

question 12

Multiple Choice

Senate Inc.is considering two alternative methods for producing playing cards.Method 1 involves using a machine with a fixed cost (mainly depreciation) of $17,000 and variable costs of $1.00 per deck of cards.Method 2 would use a less expensive machine with a fixed cost of only $5,000,but it would require a variable cost of $1.50 per deck.The sales price per deck would be the same under each method.At what unit output level would the two methods provide the same operating income (EBIT) ?

• A) 24,960
• B) 28,080
• C) 24,000
• D) 26,880
• E) 28,320

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Definitions:

Business Combination

A business combination is a transaction or event where an acquirer obtains control of one or more businesses, often in the form of mergers, acquisitions, or consolidations.

Diversification

An investment strategy aimed at reducing risk by allocating investments among various financial instruments, industries, or other categories.

Vertical Integration

A strategy where a company expands its operations into different stages of production or distribution within the same industry.

Consolidated Cash Account

A combined account that aggregates the cash balances of a parent company and its subsidiaries to give a total cash figure in consolidated financial statements.