Answer the Following Questions Using the Information Below

question 108

Multiple Choice

Answer the following questions using the information below:
Black Forrest manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $240 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Black Forrest policy to add a 50% markup to full costs.
-A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Black Forrest is invited to submit a bid to the hotel chain. What per unit price will Black Forrest most likely bid on this long-term order?

• A)$144 per unit
• B)$216 per unit
• C)$360 per unit
• D)$240 per unit

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Definitions:

Derived Demand

The demand for a resource that depends on the demand for the products it helps to produce.

Stock Options

Financial derivatives that grant the holder the right, but not the obligation, to buy or sell a stock at a specified price within a certain time frame.

Principal-Agent Problem

(1) At a firm, a conflict of interest that occurs when agents (workers or managers) pursue their own objectives to the detriment of the principals’ (stockholders’) goals. (2) In public choice theory, a conflict of interest that arises when elected officials (who are the agents of the people) pursue policies that are in their own interests rather than policies that would be in the better interests of the public (the principals).

Profit Sharing Plans

A company program that gives employees a share in the profits of the company.