Marguerite Is Reviewing a Project with Projected Sales of 1,500

question 27

Multiple Choice

Marguerite is reviewing a project with projected sales of 1,500 units a year,a cash flow of $40 a unit and a three-year project life. The initial cost of the project is $95,000. The relevant discount rate is 15%. Marguerite has the option to abandon the project after one year at which time she feels she could sell the project for $60,000. At what level of sales should she be willing to abandon the project?

• A) 899 units
• B) 923 units
• C) 967 units
• D) 1,199 units
• E) 1,206 units

Understand the distinction between direct and indirect costs in the context of product costs.

Comprehend the role of raw materials, direct labor, and overhead in the cost of finished products.

Grasp the managerial functions of planning, organizing, directing, and controlling within an entity.

Identify and differentiate between period costs and product (inventoriable) costs.

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Definitions:

Crowdsourcing

The practice of obtaining information, ideas, or input into a task or project by enlisting the services of a large number of people, typically via the internet.

Creative Deviance

The act of intentionally deviating from norms to produce novel and useful ideas or products.

Idea Generation

The process of creating, developing, and communicating new thoughts or concepts.

Diffusion

The process through which new ideas, practices, or products spread within a society or from one society to another.