After an Intensive Research and Development Effort, Two Methods for Producing

question 96

Multiple Choice

After an intensive research and development effort, two methods for producing playing cards have been identified by the Turner Company.One method involves using a machine having a fixed cost of $10,000 and variable costs of $1.00 per deck of cards.The other method would use a less expensive machine (fixed cost = $5,000) , but it would require greater variable costs ($1.50 per deck of cards) .If the selling price per deck of cards will be the same under each method, at what level of output will the two methods produce the same net operating income (EBIT) ?

• A) 5,000 decks
• B) 10,000 decks
• C) 15,000 decks
• D) 20,000 decks
• E) 25,000 decks

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Definitions:

Post Hoc Fallacy

A logical fallacy that assumes a cause-and-effect relationship because one event follows another in time.

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A break or fissure in a sidewalk, often caused by weathering, tree roots, or structural wear and tear.

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A mistaken conclusion drawn about an individual based on the traits of the whole group or set they belong to.

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