In 2019, Master Computer Expects to Sell 100,000 Computers for an Average

question 105

Multiple Choice

In 2019, Master Computer expects to sell 100,000 computers for an average price of $1000.Expected production costs are $600 per unit.In 2020, volume is expected to increase by 10%, while inflation will increase both the sales price and the cost per unit by 3%.In nominal dollars, expected gross profit for 2020 is [blank].

• A)$40 million
• B)$45.32 million
• C)$48.20 million
• D)$50 million

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Definitions:

EOQ

Economic Order Quantity; a model used in inventory management to determine the optimal order size that minimizes total holding costs and ordering costs.

Setup Cost

The expenses incurred in preparing equipment or processes for a production run or the start of an operation.

Holding Cost

The expenses associated with storing inventory over a period of time, including warehousing, insurance, spoilage, and obsolescence costs.

Net Requirements

The total demand for a product minus the quantity already on hand or on order, indicating the actual quantity needed to meet demand.