Suppose You Are the Owner of a Picture Frame Store

question 125

Multiple Choice

Suppose you are the owner of a picture frame store and you wish to calculate how many frames you must sell to cover your fixed and variable costs at a given price. Let's assume that the demand for your frames is strong, so the average price customers are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC) total $32,000 (real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a picture frame is $40 (labor, glass, frame, and matting) . If your picture frame store sold 2,000 picture frames, what would your profit (or loss) be?

• A) a loss of $32,000
• B) $0
• C) $32,000 profit
• D) $112,000 profit
• E) $128,000 profit

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Definitions:

Seniority-Based

A system or practice where decisions on promotions, layoffs, and benefits are made based on the length of an employee's service within an organization.

Union-Mandated

Requirements or actions imposed by labor unions, often through collective bargaining or union regulations, that employers must follow.

Management Rights

The prerogatives and authorities held by employers to direct and control business operations, including hiring, work assignments, and discipline.

Lean Production

A manufacturing methodology aiming at minimizing waste and maximizing efficiency by using less of everything compared to mass production.