The Draper Corporation Is Considering Dropping Its Doombug Toy Due

question 162

Multiple Choice

The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow:
If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable.
-Assuming all other conditions stay the same,at what level of annual sales of Doombugs (in units) should Draper be indifferent between discontinuing Doombugs or continuing the production and sale of Doombugs?

• A) 20,000 units
• B) 18,000 units
• C) 6,000 units
• D) 4,000 units

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Definitions:

Economic Policy Institute

A nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions.

CEOs

Chief Executive Officers, the highest-ranking individuals in a company or organization, responsible for making major corporate decisions, managing the overall operations, and resources.

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Scheduled payments made by employers to employees, usually on a monthly or biweekly basis, as compensation for their labor.

CEOs

Chief Executive Officers, the highest-ranking individuals in a company, responsible for making overarching decisions and setting strategic direction.