The Acme Flashlight Company Breaks Even at 20,000 Flashlights at $6

question 70

Multiple Choice

The Acme Flashlight Company breaks even at 20,000 flashlights at $6 each, with the average variable cost per flashlight of $4. What is the amount of its fixed costs?

• A) $20,000
• B) $40,000
• C) $60,000
• D) $80,000

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Definitions:

Cost of Capital

The rate of return that a company must pay to its capital providers, including both debt and equity, to finance its assets.

Expansion Project

A business initiative aimed at increasing the size, reach, or capabilities of the company, often requiring significant capital investment.

Capital Rationing

The process of selecting profitable projects to invest in, limited by the availability of funds.

NPV

Net Present Value, a financial metric used to evaluate the profitability of an investment, considering the time value of money.