Question 1(5 points): Select the best correct answer 1. The fixed costs for a sm

Question

Question 1(5 points): Select the best correct answer 1. The fixed costs for a small product are $220,000 per year. Variable costs per year are 50% of the annual revenue. If the annual revenue for this product is $400,000, then the annual profit/loss is: A. $180,000 (profit) B. $180,000 (loss) C. $20,000 (profit) D. $20,000 (loss) 2. Standard costs are the estimated total costs per unit of output that are established: A. During actual production or service delivery B. After actual production or service delivery C. In advance of actual production and service delivery D. None of the above 3. The demand-price relationship for producing an electrical switch is: D -400-4p. The total monthly cost (Cr) for this product is: Cr 2D 240, where D is the demand per month. The demand per month that can maximize the profit is: A. 200 units/month B. 196 units/month C. 177 units/month D. 124 units/month 4. Acofmpary ay lboer to roduec eonte han purchase it foma supplier at a price lower than production costs if A. Direct and/or indirect costs are incurred anyway B. The incremental cost of producing the item in the short run is less than the supplier's price C. In-house manufacture of an item causes other production opportunities to be foregone D. All the above E. A and B above F. A and C above G. B and C above 5. For a nominal interest rate of 12% compounded every three months, the actual interest rate per compounding period is: A, B. C. D. 4% 3% 12.551% 12.486%

Explanation / Answer

1) total variable cost= 50% of 400000= 200000

Profit= revenue-cost

= 400000 - 200000 - 220000

= - 20000

Loss of 20000

D is correct

2) C is correct

Standard cost are estimated before production to compare it with actual cost. It is a predetermined cost.

3) profit is maximised at MR=MC

D= 400-4p

4p= 400-D

p= 100-0.25D

TR= pD= 100D - 0.25D^2

MR = d(TR)/dD= 100-0.5D

C= 2D + 240

MC= dC/dD= 2

MR= MC

100-0.5D = 2

D = 196

B. Is correct

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