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FE: A company is planning to manufacture a product and sell it for $2.00 per unit. The following data apply: Cost of equipment to manufacturer
FE: A company is planning to manufacture a product and sell it for $2.00 per unit. The following data apply: Cost of equipment to manufacturer the product = $200,000 Net salvage value at end of estimated economic life of 10 years = $10,000 Number of units per year the manufacturer can make = 1,000,000 Direct labor costs per unit = $0.30 Direct material cost per unit = $0.65 Variable administrative and selling expenses per unit = $0.20 Fixed overhead costs per year (not including depreciation) = $150,000 Demand Units/Year Probability 500,000 0.1 600,000 0.2 700,000 0.4 800,000 0.2 900,000 0.1 If demand follows the probability distribution shown in the table above, and straight line depreciation is used, the expected average net profit per year before taxes is most nearly: $445,000 O $45,000 O $226,000 0 $426,000
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