Multiple Choice
Kurt's Coffees has a new hot drink in mind that is expected to generate sales of 24,000 units over its 2-year life.The initial cost for equipment is $69,500.This equipment will be depreciated straight-line to zero over 2 years and have no salvage value.The fixed costs are $17,800,and the contribution margin is $2.20.The tax rate is 35 percent,and the discount rate is 14 percent.Should this new drink be pursued? Why or why not?
A) Yes;because the financial breakeven quantity of 19,014 units is less than expected sales
B) Yes;because the financial breakeven quantity of 18,648 units is less than expected sales
C) Yes;because the financial breakeven quantity of 29,101 units exceeds the expected sales
D) No;because the financial breakeven quantity of 19,014 units is less than expected sales
E) No;because the financial breakeven quantity of 29,101 units exceeds the expected sales
Correct Answer:
Verified
Correct Answer:
Verified
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