Dotterel Corporation Uses the Variable Cost Concept of Product Pricing

question 129

Multiple Choice

Dotterel Corporation uses the variable cost concept of product pricing. Below is cost information for the production and sale of 35,000 units of its sole product. Dotterel desires a profit equal to a 11.2% rate of return on invested assets of $350,000. The variable cost per unit for the production and sale of the company's product is:

• A) $14.00
• B) $12.60
• C) $ 9.80
• D) $11.20

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Definitions:

Short Run

A period in which at least one input or factor of production is fixed, allowing only some inputs to change.

Long Run

A period of time in economics during which all inputs and factors of production can be adjusted, allowing for full industry adjustment to changes.

Production

The process of combining inputs to make goods or services.

LAC Curves

The Long-Run Average Cost curves, which show the minimum average cost of production at different levels of output.