Jane Westerlund Owns a Picture-Framing Store, the Caplow Co

question 32

Multiple Choice

Jane Westerlund owns a picture-framing store, The Caplow Co. The average price she receives for a framed picture is $120. This price must cover her costs for a typical framed picture, which consists of $5 for glass, $2 for matting, $13 for the frame, and $30 for the labor involved. She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for her salary. Assuming there is no change in price or the quantity demanded, if Westerlund wants to increase her advertising expenses to a total of $1,000 (a $500 increase) , this would cause total costs to __________ and the break-even quantity to __________.

• A)decrease; stay the same
• B)increase; increase
• C)decrease; increase
• D)stay the same; increase
• E)stay the same; decrease

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Definitions:

Earnings Per Share

A measure of a company's profitability that calculates the portion of a company's profit allocated to each outstanding share of common stock.

Market Price

The current financial demand for buying or selling a service or asset.

Debt Issue

Refers to a financial obligation or securities, such as bonds, that are issued by a company in order to raise funds.

Capital Structures

Refers to the way a corporation finances its assets through a combination of debt, equity, or hybrid securities.