CalcuCo Hired Effner & Associates to Design a New Computer-Aided

question 104

Multiple Choice

CalcuCo hired Effner & Associates to design a new computer-aided manufacturing facility. The new facility was designed to produce 300 computers per month. The variable costs for each computer are $660 and the fixed costs total $74,700 per month. The average cost per unit, if the facility normally expects to operate at eighty-five percent of capacity, is calculated to be (round to nearest cent) :

• A) $952.94.
• B) $909.00.
• C) $936.67.
• D) $971.25.
• E) $942.47.

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Definitions:

Levered Firm

A company that utilizes debt financing as a significant portion of its capital structure.

Indirect Bankruptcy Costs

Expenses related to bankruptcy that are not direct costs such as legal and administrative fees, including damage to corporate reputation and loss of business opportunities.

Corporate Default

A failure of a company to fulfill its financial obligations, such as missing a debt payment.