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:

Corporate Bond

A type of bond issued by corporations to fund capital investments and operations, promising to pay back with interest.

Yield

The income return on an investment, such as the interest or dividends received from holding a particular security.

Face Value

The nominal or dollar value printed on a security, such as a bond or stock, which indicates its value at issuance or maturity.

Dividend Payments

Payments made by a corporation to its shareholder members, usually derived from the company's profits.