The Costs to a Store Two Models of Global Positioning

question 72

Multiple Choice

The costs to a store two models of Global Positioning System (GPS) receivers are $80 and $100.The $80 model yields a profit of $25 and the $100 model yields a profit of $30.Market tests and available resources indicate the following constraints. The merchant estimates that the total monthly demand will not be exceed 200 units.
The merchant does not want to invest more than $18,000 in GPS receiver inventory.
What is the optimal inventory level for each model what is optimal profit?

• A) A maximum profit of $4500 occurs when 180 of each model of GPS receiver is sold.
• B) A maximum profit of $5000 occurs when 200 of each model of GPS receiver is sold.
• C) A maximum profit of $5400 occurs when 180 of each model of GPS receiver is sold.
• D) A maximum profit of $6000 occurs when 200 of each model of GPS receiver is sold.
• E) A maximum profit of $5500 occurs when 100 of each model of GPS receiver is sold.

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Definitions:

Direct Labor-Hours

The total hours of labor directly involved in producing goods or delivering services.

Underapplied Overhead

Occurs when the overhead assigned to products is less than the overhead actually incurred, leading to a shortfall that needs to be addressed in cost accounting.

Predetermined Overhead Rate

An estimated charge per activity unit used to assign overhead costs to products or services, calculated before the period begins.

Direct Labor-Hours

The sum of hours contributed by workers directly participating in creating goods or offering services.