Veron Corporation Is Considering Building a New Plant in Europe

question 145

Multiple Choice

Veron Corporation is considering building a new plant in Europe.They predict sales at the new plant to be 100,000 units at $4.00/unit.Below is a listing of estimated expenses: $$\begin{array} { | l | c | c | } \hline \text { Category } & \begin{array} { c } \text { Total Annual } \\\text { Expenses }\end{array} & \begin{array} { c } \text { \% of Annural Expense } \\\text { thrat are Fixed }\end{array} \\\hline \text { Materials } & \$ 20,000 & 10 \% \\\hline \text { Labar } & \$ 30,000 & 20 \% \\\hline \text { Overhead } & \$ 50,000 & 40 \% \\\hline \text { Marketing/Admin } & \$ 10,000 & 60 \% \\\hline\end{array}$$ A European firm was contracted to sell the product and will receive a commission of 13% of the sales price.No U.S.home office expenses will be allocated to the new facility.
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The unit variable cost for Veron Corporation is:

• A)$1.28.
• B)$1.62.
• C)$0.76.
• D)$0.86

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Definitions:

Inventory Turnover

A measure that reveals the frequency at which a firm's stock is sold and replenished within a given timeframe, demonstrating the effectiveness of its inventory control.

Accounts Receivable Turnover

A financial ratio indicating how many times a company collects its average accounts receivable balance in a given period.

Year 2

Designates the second fiscal or calendar year in a sequence of years, crucial for tracking progress, budgets, and planning in various contexts.

Average Collection Period

The average amount of time it takes for a business to receive payments owed by its customers for goods or services sold on credit.