Broze Company Makes Four Products in a Single Facility

question 8

Multiple Choice

Broze Company makes four products in a single facility.These products have the following unit product costs: Additional data concerning these products are listed below. The grinding machines are the constraint in the production facility.A total of 53,600 minutes are available per month on these machines.Direct labor is a variable cost in this company.Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole cent. )

• A)$35.90.
• B)$0.00.
• C)$8.58.
• D)$11.60.

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Definitions:

EBIT

Earnings Before Interest and Taxes, a measure of a firm's profit that includes all expenses except interest and income tax expenses.

WACC

Weighted Average Cost of Capital, a calculation used to estimate the average cost of a company's financing including equity and debt, reflecting the risk of investments.

Unlevered Return

The return on an investment that has not been adjusted for the effects of leverage or borrowing.

Total Firm Value

The overall value of a company, including both equity (market capitalization) and debt levels, used in business valuation and financial analysis.