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:

Straight Line

The shortest path between two points, used in both geometric figures and in context like depreciation methods in accounting.

Opportunity Cost

The forfeit of not opting for the following most advantageous option when a decision is reached.

Good X

A placeholder term used in economics to represent a generic good or product in theoretical models and discussions.

Production Possibility Frontier

A curve depicting the maximum feasible amounts of two commodities that a society can produce with current technology and resources.