Refer to the Scenario Below to Answer the Following Questions

question 93

Multiple Choice

Refer to the scenario below to answer the following questions.
Breakeven Analysis at MRI (Scenario)
Mike has just been hired as a sales manager at Mobile Research Inc. (MRI) , makers of the popular Blueberry wireless phone. At his first management briefing, Mike is informed that the company is losing money, despite the immense popularity of the Blueberry phone. He learns that the company is facing intense competition from its main rival, Mandarin Communications, makers of the M-Phone. The M-Phone has the same popular features as the Blueberry and sells for $40 less. When Mike asked about the cost structure for the Blueberry he was informed that the selling price is $200, variable costs are $120, and total fixed costs are $800,000 per month.
-If the company sold only 7,500 Blueberry phones last month, what was the loss?

• A) $100,000
• B) $200,000
• C) $300,000
• D) $400,000
• E) $500,000

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Definitions:

Declining Balance Depreciation

A depreciation method that applies a constant rate to the declining book value of an asset, resulting in accelerated depreciation.

Straight-Line Rate

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.

End Assets

End assets refer to the total assets a company reports on its balance sheet at the end of a specific financial period.

Residual Value

The estimated value of an asset at the end of its useful life, reflecting what it could be sold for or its salvage value.