Berkeley Company Currently Has Idle Plant Capacity and Wishes to Make

question 61

Multiple Choice

Berkeley Company currently has idle plant capacity and wishes to make as large a profit as possible. It could use some of its facilities to produce 5 000 units of a new product that could be sold through its existing sales network. The new product would have the following estimated costs.
$$\begin{array} { l c } & \text { Per unit } \\\text { Materials } & \$ 6 \\\text { Labour } & \$ 12 \\\text { Variable factory overhead } & \$ 5 \\\text { Variable selling \& administrative costs } & \$ 3\end{array}$$
Assume the fixed factory overhead for the plant is $8 000 per month and the fixed selling and administrative costs are $1800 per month. What is the minimum price per unit that Berkeley could charge for this product without reducing overall profits?

• A) $18
• B) $21
• C) $26
• D) $20

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Definitions:

Compulsion

The action or state of forcing or being forced to do something; constraint.

Internal Compulsion

Internal Compulsion is a psychological force that drives individuals to act in a certain way or pursue certain actions, often without external pressure.

Achievement-Oriented

Pertaining to an individual or organization that consistently aims for and pursues high levels of accomplishment and success.

Perfectionists

Individuals who strive for flawlessness and setting high performance standards, accompanied by critical self-evaluations and concerns regarding others' evaluations.