A Manufacturing Company Is Studying the Feasibility of Producing a New

question 23

Multiple Choice

A manufacturing company is studying the feasibility of producing a new product. The selling price is expected to be $7. The new production line would manufacture up to 19,250 units at a variable cost of $1.85 per unit. Fixed costs would be $50,000. Variable selling and administration expenses would amount to $1.15. Determine the dollar sales needed to earn operating loss of $4,000.

• A) $81,000
• B) $80,500
• C) $80,000
• D) $79,500
• E) $79,000

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Definitions:

Fundamental Questions

Basic questions that economies face regarding what to produce, how to produce, and for whom to produce, based on limited resources.

Unemployment

The failure to use all available economic resources to produce desired goods and services; the failure of the economy to fully employ its labor force.

Barter System

An economic system where goods or services are directly exchanged for other goods or services without using money.

Coincidence of Wants

A situation in a barter system where two parties each have a good or service that the other desires, allowing for a direct trade.