The Oliver Company Plans to Market a New Product

question 19

Multiple Choice

The Oliver company plans to market a new product. Based on its market studies, Oliver estimates that it can sell up to 5,500 units in 2005. The selling price will be $3 per unit. Variable costs are estimated to be 10% of total revenue. Fixed costs are estimated to be $10,800 for 2005. How many units should the company sell to break even?

• A) units
• B) units
• C) units
• D) units
• E) units

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Definitions:

Direct Labour

The work done by employees directly involved in producing a product or delivering a service, often considered a variable cost.

Direct Materials

Direct materials are the raw materials that are directly traceable and allocable to a finished product in the manufacturing process, directly impacting the cost of goods sold.

Production Costs

The total expense incurred in the manufacture of a product, including labor, materials, and overhead.

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overhead, payroll, taxation, and interest payments.