BASIC INFORMATION: a Three-Year Project Will Cost $60,000 to Construct

Multiple Choice

BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per unit sold is $10. Fixed costs are $30,000 per year.

Using the BASIC INFORMATION, compute the DOL if the quantity sold is 7,000. (Ignore taxes.)

A) 0.75
B) 1.36
C) 1.49
D) 1.75
E) 2.36