Simon IncCurrently Produces 110,000 Units at a Cost of $440,000

question 9

Multiple Choice

Simon Inc.currently produces 110,000 units at a cost of $440,000.The cost is variable.Next year Simon Inc.expects to produce 115,000 units.Simon's relevant range for production is 100,000 to 120,000 units.If 115,000 units are produced next year,what is the expected variable cost?

• A) $420,000
• B) $430,000
• C) $440,000
• D) $460,000

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Definitions:

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specified price within a specific time period.

Expiration

The date on which a derivative contract such as an option or futures contract becomes void and the right to exercise it no longer exists.

Arbitrage Opportunity

A situation where a trader can profit from differences in price of the same asset in different markets without taking on any risk.

American Put Option

A type of put option that can be exercised at any time before its expiration, allowing the holder to sell the underlying asset at a specified price.