Ships Ahoy Is a Small Company That Makes Model Sailboat

question 280

Multiple Choice

Ships Ahoy is a small company that makes model sailboat kits priced at $120 each.(There is no quantity discount.) The costs of the materials that go into each kit are $45.It costs $5 in labour to assemble a kit.The company has monthly expenses of $1,000 for rent and insurance,$200 for heat and electricity,$500 for advertising in sailing and hobby magazines,and $3,500 for the monthly salary of its owner.If Ships Ahoy sells 150 kits in a given month,its monthly profit will be:

• A)$5,300.
• B)$10,500.
• C)$12,700.
• D)$12,800.

---

Definitions:

Required Reserve Ratio

The minimum fraction of deposits banks are required by law to keep as reserves, either in their vaults or on deposit at a central bank.

Term Auction Facility

A monetary policy tool used by the Federal Reserve to provide short-term loans to banks, aiming to improve liquidity and stability in financial markets.

Bank Insolvency

A situation where a bank's liabilities exceed its assets, making it unable to meet its obligations and continue its operations.

Excess Reserves

Banks' reserves that exceed the minimum requirement set by a central bank, not lent out and often kept for emergency purposes.