The ABC Corporation Is Considering Introducing a New Product,which Will

question 17

Multiple Choice

The ABC Corporation is considering introducing a new product,which will require buying new equipment for a monthly payment of $5,000.Each unit produced can be sold for $20.00.ABC incurs a variable cost of $10.00 per unit.How many units must ABC sell each month to break even?

• A)500 units
• B)5000 units
• C)250 units
• D)2500 units
• E)25 units

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Definitions:

Machine-Hours

A measure of production time, indicating the total hours that machines are operating in the manufacturing process.

Manufacturing Overhead

The indirect factory-related costs that are incurred when producing a product, including costs related to management, utilities, and equipment depreciation.

Direct Labor-Hours

The total hours worked by employees who are directly involved in the manufacturing process and whose work can be easily traced to the product.

Manufacturing Overhead

All production costs other than direct labor and direct materials, which are incurred in the manufacturing process.