EpicSept Is About to Introduce a New Employee Monitoring Tool

question 16

Multiple Choice

EpicSept is about to introduce a new employee monitoring tool which it will sell for $100 per unit. The firm must decide whether or not to purchase a high-capacity manufacturing machine. If the high-capacity machine is selected, then the cash fixed costs will be $5,000 per year, with variable costs of $50 per unit and depreciation and amortization expenses of $2,000. Otherwise the fixed costs will be $2,000, with variable costs of $75 per unit and depreciation and amortization expenses of $500. If EBIT Break-even is how the firm evaluates its projects, then above what level of expected sales should EpicSept choose the high fixed cost alternative?

• A) 60 units
• B) 90 units
• C) 120 units
• D) 180 units

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Definitions:

Natural Selection

The process by which organisms better adapted to their environment tend to survive and produce more offspring, a fundamental concept in evolutionary biology.

Fecundity

The potential reproductive capacity of an individual or population, often measured by the number of offspring produced.

Activation

The process of initiating action or the state of being active, often discussed in psychological and physiological contexts.

Parental Investment Model

A theory proposing that the extent and type of investment parents make in their offspring affects the offspring's survival and reproductive success.