Based on a Predicted Level of Production and Sales of 12,000

question 101

Multiple Choice

Based on a predicted level of production and sales of 12,000 units, a company anticipates reporting operating income of $26,000 after deducting variable costs of $72,000 and fixed costs of $10,000. Based on this information, the budgeted amounts of fixed and variable costs for 15,000 units would be:

• A) $10,000 of fixed costs and $72,000 of variable costs.
• B) $10,000 of fixed costs and $90,000 of variable costs.
• C) $12,500 of fixed costs and $90,000 of variable costs.
• D) $12,500 of fixed costs and $72,000 of variable costs.
• E) $10,000 of fixed costs and $81,000 of variable costs.

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Definitions:

Midwestern

Pertaining to the Midwestern region of the United States, often characterized by its geographical location, culture, or particular attributes of the area.

Substitution Effect

Refers to consumers’ ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand.

Cross-Price Elasticity

A measure of how the demand for one product changes in response to a price change of another product.

Toothpaste

A gel or paste used with a toothbrush to clean and maintain the aesthetics and health of teeth, often containing fluoride to prevent dental cavities.