Answer the Following Questions Using the Information Below

question 147

Multiple Choice

Answer the following questions using the information below:
Southwestern College is planning to hold a fundraising banquet at one of the local country clubs. It has two options for the banquet:
Southwestern College has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local business supporters will donate any other items required for the event.
-Option 1: Fixed costs of $10,000 and a breakeven point of 500 units. Option 2: Fixed costs of $20,000 and a breakeven point of 700 units.
Which option should you choose if you are expecting to produce 600 units?

• A)Option one
• B)Option two
• C)Both options are equally desirable.
• D)The best option is indeterminable.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company. This includes material and labor costs.

Debt-to-Equity Ratio

A financial metric that shows the balance between the equity provided by shareholders and the debt leveraged to support a company's assets.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available for its day-to-day operations.

Long-term Liabilities

Financial obligations of a business that are due more than one year in the future, such as bonds payable or long-term loans.