Ranbow Inc

question 63

Multiple Choice

Ranbow Inc.is about to introduce a new LED clock and has determined that it will charge $35 per clock. The firm must decide whether or not to purchase a high-capacity clock-making machine. If the high-capacity machine is selected, then the fixed costs for the firm will be $4,000 per year, with variable costs of $6 per clock. Otherwise the fixed costs will be $800, with variable costs of $16 per clock. Above what level of expected sales should Ranbow Inc. choose the high fixed cost alternative to maximize pretax operating cash flow?

• A) 320 units
• B) 352 units
• C) 3200 units
• D) 500 units

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Definitions:

Lithium

A chemical element, used especially in batteries and psychiatric medication for its mood-stabilizing properties.

Electroconvulsive Therapy (ECT)

A biomedical treatment in which electric shock is used to produce a cortical seizure accompanied by convulsions.

Cortical Seizure

A seizure that originates in the cerebral cortex of the brain, affecting thoughts, behaviors, and movements.

Antipsychotic Drugs

Drugs used to gradually reduce psychotic symptoms, including hyperactivity, mental confusion, hallucinations, and delusions.