Nantucket Industries Manufactures and Sells Two Models of Watches, Prime

question 41

Multiple Choice

Nantucket Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 3,500 units of Prime and 1,500 units of Luxuria in 2019.The following estimates are given for 2019:

Nantucket had an inventory of 200 units of Prime and 105 units of Luxuria at the end of 2018. It has decided that as a measure to counter stock outages it will maintain ending inventory of 400 units of Prime and 230 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $12. There were 120 units of Crimpson in stock at the end of 2018. The management does not want to have any stock of Crimpson at the end of 2019.
What is the total budgeted cost of goods sold for Nantucket Industries in 2019?

• A) $1,325,000
• B) $1,415,000
• C) $1,433,000
• D) $1,625,000

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Definitions:

AFC

Average Fixed Cost, which is the fixed costs of production divided by the quantity of output produced.

MR

Marginal Revenue, which refers to the additional income generated from selling one more unit of a good or service.

MC

The cost associated with producing an additional unit of a good or service, reflecting the increase in total production cost.

Monopolistic Firm

A single firm that dominates a particular market or industry, often characterized by the absence of competition, which results in high prices and inferior products.