Dave's Mirror Company Expects to Sell $1,000,000 Worth of Mirrors

question 150

Multiple Choice

Dave's Mirror Company expects to sell $1,000,000 worth of mirrors and to produce 1,250,000 worth of mirrors in the coming year.The company purchases $300,000 of new equipment during the year.Sales for the year turn out to be $1,000,000.Actual investment by Dave's Mirror Company equals ________ and planned investment equals _______.

• A) $250,000;$250,000
• B) $300,000;$300,000
• C) $550,000;$550,000
• D) $300,000;$550,000
• E) $550,000;$300,000

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Definitions:

Agency Cost

The costs arising from conflict of interest between principals (owners) and agents (managers), including monitoring expenditures and the costs of structuring operations to minimize issues.

Marginal Cost

The cost incurred by producing one additional unit of a product or service.

Claim Dilution

The reduction in the likelihood of recovery or the value of each creditor’s claim as a result of an increase in the number of claimants or claims against the same debtor or asset.

Secured Loan

A loan that is backed by collateral, providing the lender with assurance that the loan will be repaid.