A Firm That Produces and Sells Toys Has a Factory

question 34

Multiple Choice

A firm that produces and sells toys has a factory located in New Town built on a 50,000 square feet plot of land. The following table gives information about the costs of production and output of the firm.
Table 6-1
$\begin{array}{|l|l|}\hline \text { Cost of plant and machinery } & \$ 20,000 \\\hline \text { Wages paid to labor } & \$ 4,000 \\\hline \text { Annual factory rent } & \$ 10,000 \\\hline \begin{array}{l}\text { Annual registration fees paid to an industry } \\\text { association }\end{array} & \$ 1,000 \\\hline \text { Marketing Costs } & \$ 20,000 \\\hline \text { Cost of raw materials used in production } & \$ 3,000 \\\hline \text { Cost of packaging used for the final product } & \$ 400 \\\hline \text { Number of toys produced per day } & 1,000 \\\hline \text { The price of a toy } & \$ 30 \\\hline\end{array}$

-Refer to Table 6-1. What is the average variable cost of producing a toy?

• A) $4.00
• B) $7.40
• C) $9.80
• D) $8.00
• E) $8.60

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Definitions:

Repurchase

The act of a company buying back its own shares from the marketplace, which can affect the company's share price and capital structure.

Stock

A type of security that represents ownership in a corporation and a claim on a part of the company’s assets and earnings.

Earnings Per Share

A portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of a company's profitability.

Dividends Per Share

This is the amount of dividends paid to shareholders per existing share, illustrating the dividend payout on a per share basis.