If the Contribution Margin Is $10, the Selling Price Per

question 84

Multiple Choice

If the contribution margin is $10, the selling price per unit is $25 and the fixed costs are $45 000, to earn a targeted net profit of $50 000 the total dollar value of sales must be at least

• A) $10 000.
• B) $112 500.
• C) $122 500.
• D) $237 500.

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Definitions:

Coase Theorem

a principle that asserts that in the absence of transaction costs, parties can negotiate solutions to externalities among themselves, regardless of the initial allocation of property rights.

Externalities

Economic side effects or consequences of commercial activities that affect other parties without being reflected in the cost of the goods or services involved.

Adverse Selection

A situation in markets where buyers and sellers have different information, leading to transactions where one party may be disadvantaged.

Insurance Payouts

Refers to the money that insurance companies pay to policyholders or beneficiaries when a claim is made and approved under the terms of an insurance policy.