Chocolate Company Is Considering the Production of a New Product

question 32

Multiple Choice

Chocolate Company is considering the production of a new product.Chocolate Company has the following data available:
$\begin{array}{ll}\text { Expected sales(units) over product life } & 15,000 \\\text { Variable production costs } & \$ 42 \text { per unit } \\\text { Variable selling costs } & \$ 16 \text { per unit } \\\text { Annual fixed production costs } & \$ 15,000 \\\text { Annual fixed selling costs } & \$ 5,000 \\\text { Research and development costs } & \$ 184,000\end{array}$
What is the total variable cost of the product over the product life cycle?

• A) $204,000
• B) $716,000
• C) $870,000
• D) $880,000

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Definitions:

Specialize

The process of concentrating on and becoming expert in a particular subject or skill, often used in the context of labor and production.

Produce

Produce generally refers to agricultural products, especially fresh fruits and vegetables, harvested for human consumption.

Lower Cost

A situation or strategy in which the production or offering of goods and services is achieved with minimal expense.

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not influence future business decisions.