Asked by Janet Miller on Jul 12, 2024
Verified
Assuming all other conditions stay the same, at what level of annual sales of Doombugs (in units) should Draper be indifferent between discontinuing Doombugs or continuing the production and sale of Doombugs?
A) 20,000 units
B) 18,000 units
C) 6,000 units
D) 4,000 units
Annual Sales
The total volume of revenue generated from goods or services sold by a company in a fiscal year.
Production
The process of creating, manufacturing, or using components to produce a final product or service.
- Examine the monetary impact of halting a product's sale.
Verified Answer
JH
Jackie Herrera
Jul 14, 2024
Final Answer :
D
Explanation :
Price per unit = $150,000 ÷ 15,000 units = $10 per unit
Variable expense per unit = $120,000 ÷ 15,000 units = $8 per unit
($10 per unit - $8 per unit)× Quantity sold - $8,000 > $0
($10 per unit - $8 per unit)× Quantity sold > $8,000
$2 per unit × Quantity sold > $8,000
Quantity sold > $8,000 ÷ $2 per unit = 4,000 units
Variable expense per unit = $120,000 ÷ 15,000 units = $8 per unit
($10 per unit - $8 per unit)× Quantity sold - $8,000 > $0
($10 per unit - $8 per unit)× Quantity sold > $8,000
$2 per unit × Quantity sold > $8,000
Quantity sold > $8,000 ÷ $2 per unit = 4,000 units
Learning Objectives
- Examine the monetary impact of halting a product's sale.
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