Simplistic Inc

question 104

Multiple Choice

Simplistic Inc.has a project that costs $800,000.It has a 70% chance of a $1,500,000 payoff and a 30% chance of a $50,000 payoff.What is the expected payoff and the expected profit or loss from the new project?

• A)The expected payoff is $1,065,000,and the expected gain is $265,000.
• B)The expected payoff is $700,000,and the expected loss is $100,000.
• C)The expected payoff is $600,000,and the expected gain is $0.
• D)The expected payoff is $500,000,and the expected loss is $100,000.

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Definitions:

Total Variable Inspection Cost

The cumulative cost that varies directly with the volume of production or service, specifically related to the inspection of products or services to ensure quality.

Variable Inspection Cost

The expenses associated with quality control measures that fluctuate with the volume of production.

Machine-Hours

A measure of production output or activity based on the number of hours that machines are operated.

Average Costs

The total costs of production divided by the number of units produced, often used to assess cost efficiency.