EpicSept Is About to Introduce a New Employee Monitoring Tool

question 54

Multiple Choice

EpicSept is about to introduce a new employee monitoring tool and has determined that it will charge $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:

Communication

The process of exchanging information and ideas between individuals or groups using spoken words, written language, or other mediums.

Convenience

The quality of being suitable or suitable to one's needs or purposes with minimal effort or difficulty, often emphasized in product and service design.

Supply Chain

The entire network of entities involved in producing and delivering a product or service from the raw material to the end user.

Buyer

An individual or entity that makes a purchase of goods or services.