A Firm Sells Two Products

question 112

Multiple Choice

A firm sells two products. Product A sells for $100; its variable cost is $40. Product B sells for $150; its variable cost is $75. Product A accounts for 70 percent of the firm's sales, while B accounts for 30 percent. The firm's fixed costs are $1 million annually. Assume the firm operates 300 days per year. How many dollars of sales does the firm need to generate per day to break even?

• A) $1,754,386
• B) $5,848
• C) $3,333
• D) $2,325,581
• E) $7,752

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Definitions:

Operating Activities

Activities that relate directly to the operation of a company, including manufacturing, selling, marketing, and administrative functions.

Income Taxes

Government-imposed charges on the income earned by individuals and businesses, calculated according to tax laws.

Capital Expenditures

Expenses for acquiring physical assets or making upgrades to existing ones, which are expected to provide benefits over a long period.

Direct Method

A technique used in cost accounting to allocate service department costs directly to production departments without considering service department interactions.