Kelvin CoProduces and Sells Socks

question 37

Multiple Choice

Kelvin Co.produces and sells socks.Variable costs are $4 per pair,and fixed costs for the year total $90,000.The selling price is $6 per pair.The sales dollars required to make a before-tax profit of $10,000 are:

• A)$300,000.
• B)$309,000.
• C)$276,000.
• D)$306,000.
• E)$312,000.

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Definitions:

Project Life

The duration over which a project is expected to operate or be active, from commencement to completion.

Cost of Debt

The effective rate that a company pays on its borrowed funds from loans or bonds.

Cost of Equity

The return a company must offer investors to compensate for the risk of investing in its stock, usually estimated using models like the Capital Asset Pricing Model (CAPM).

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, and typically pays dividends before common stock.