George PBurdell Owns a Hot Tub Store That Is Experiencing Significant

question 79

Multiple Choice

George P.Burdell owns a hot tub store that is experiencing significant growth.Burdell is trying to decide whether to expand the store's capacity,which currently is at $750,000 in sales per quarter.He is thinking about expanding to the $850,000 level.The before-tax profit from additional sales is 20 percent.Sales are seasonal,with peaks in the spring and summer quarters.Forecasts of capacity requirements,expressed in ($000) sales per quarter,for next year (year 2) are: Demand in year 3 and beyond is expected to exceed $850,000 per quarter.Burdell is considering expansion at the end of the fourth quarter of this year (year 1) .How much would before-tax profits in year 2 increase because of this expansion?

• A)less than $28,000
• B)more than $28,000 but less than $32,000
• C)more than $32,000 but less than $36,000
• D)more than $36,000

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Definitions:

Costs More

Refers to an increase in financial expenditure or the necessity to spend more money on a specific item or service.

Indifference Schedule

A tabular representation showing combinations of goods between which a consumer is indifferent, reflecting similar preferences as an indifference map.

Units of X

A quantifiable amount of a product or resource, denoted as 'X', used in various contexts to measure output, consumption, or other economic variables.

Marginal Rate

refers to the rate at which one variable changes as another variable changes slightly, commonly used in the context of taxes or interest.