Use the Figure for the Question(s) Below

question 61

Multiple Choice

Use the figure for the question(s) below.
-A company planning to market a new model of motor scooter analyzes the effect of changes in the selling price of the motor scooter, the number of units that will be sold, the cost of making the motor scooter, the effect on Net Working Capital, and the cost of capital for the project. They predict that the break-even point for sales price for the motor scooter is $2,480. What does this mean?

• A) If the motor scooter is sold for $2,480, then the project will make a profit.
• B) If the motor scooter is sold for $2,480, then the net present value (NP
• V) for the product will be zero.
• C) The predicted selling price of the motor scooter is $2,480.
• D) The maximum that the motor scooter can sell for and still make the project have a positive net present value (NP
• V) is $2,480.

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Definitions:

Periodic Inventory

An inventory accounting system where inventory counts and cost of goods sold (COGS) are determined at the end of an accounting period.

Inventory Balance

The total value of a company's inventory at the end of an accounting period, comprising raw materials, work-in-progress, and finished goods.

LIFO of $450,000

The last-in, first-out method applied to inventory that results in an ending balance of $450,000.

LIFO Reserve

The difference between the cost of inventory calculated using the Last In, First Out (LIFO) method and the cost calculated using the First In, First Out (FIFO) method.