A Company Is Evaluating Which of Two Alternatives Should Be

question 28

Multiple Choice

A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives If total demand (volume) is 120,000 units, then the company should

• A) select Process A with a profit of $940,000 to maximize profit
• B) select Process B with a profit of $450,000 to maximize profit
• C) select Process A with a profit of $700,000 to maximize profit
• D) select Process B with a profit of $690,000 to maximize profit

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Definitions:

Net Profit

The financial gain remaining after subtracting all expenses, taxes, and costs from total revenue, indicating the overall profitability of a business.

Fixed Asset Turnover Ratio

A financial metric that measures a company's efficiency in using its fixed assets to generate sales, calculated by dividing sales by the book value of fixed assets.

Net Fixed Assets

The value of a company's property, plant, and equipment minus any accumulated depreciation, representing long-term investments in the business.

Sales

The exchange of goods or services for money; also refers to the function or department within a business that handles this activity.