Ignoring the Time Value of Money, How Much Does a Firm

question 92

Multiple Choice

Ignoring the time value of money, how much does a firm lose on a $2,000 sale that has a 30% profit margin if the 20% probability of default occurs?

• A) $120
• B) $280
• C) $600
• D)$1,400

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Definitions:

Direct Labor

The workforce directly involved in manufacturing a product or delivering a service, whose costs are directly attributable to the product.

Variable Manufacturing

Costs in manufacturing that vary with the level of production output, such as raw materials and labor costs.

Factory Overhead

All indirect costs associated with manufacturing, such as utilities, maintenance, and depreciation of equipment, excluding direct materials and direct labor.

Direct Labor

Direct labor refers to the work of employees directly involved in the manufacturing of products.