Question 16
Red Rock Company sells a single product that has variable costsof $14 per unit. Fixed costs will remain constant across all levelsof sales shown.
Units Sold
Price per Unit
80,000
$35
90,000
$33
100,000
$31
110,000
$29
120,000
$27
What price should Red Rock charge to maximize profits?
A. $33
B. $29
C. $31
D. $27
E. $35
2 points
Question 17
Core Manufacturing makes a single product. Budget informationregarding the current period is given below:
Revenue (100,000 units at $8.00) $800,000
Direct materials $170,000
Direct labor 125,000
Variable manufacturing overhead 235,000
Fixed manufacturing overhead 110,000
640,000
Net income $160,000
Deer Company approaches Core with a special order for 15,000 unitsat a price of $8.50 per unit. Variable costs will be the same asthe current production and accepting the special order will nothave any impact on the rest of the company's orders. However, Coreis operating at capacity and will incur an additional $55,000 infixed manufacturing overhead if the order is accepted. What is theincremental income (loss) associated with accepting the specialorder?
A. $48,000
B. ($7,000)
C. $134,500
D. ($23,500)
2 points
Question 18
Jackson Company is trying to determine the optimal price tocharge for its PUNCH model. Jackson has fixed costs of $50,000 andthe PUNCH has variable costs of $12.00 per unit. Jackson hasdetermined that the following relationships exist between price anddemand:
Price
Demand
$20
6,875
$19
8,800
$18
10,000
$17
11,000
What is the contribution margin for a price of $20?
A. $12.00
B. $8.00
C. $10.00
D. $6.00
Question 21
Wharton Company has the capacity to produce 50,000 units peryear. The company sells each unit for $125. Budgeted information isas follows:
Revenues $5,612,000
Direct materials $1,932,000
Direct labor 552,000
Manufacturing overhead (fixed) 276,000
Manufacturing overhead (variable) 552,000
3,312,000
Total $2,300,000
A special order has been received for 5,000 units to be sold for$80 per unit. The company would incur an additional $60,000 intotal fixed costs in order to lease a special machine in order tomake a slight modification to the original product. Should thecompany accept the special order?
A. Yes, the revenue will increase substantially.
B. No, total costs would increase by $303,600.
C. Yes, profit will increase by $36,400.
D. No, accepting this order would decrease profits to$2,263,600.
2 points
Question 22
Billings Company sells one product with a variable cost of $4per unit. The company is unsure what price to charge in order tomaximize profits. The price charged will also affect the demand asshown below.
Units Sold
Price
20,000
$9
30,000
$8
35,000
$7
50,000
$6
If fixed costs are $100,000 and the chart represents the demand atvarious prices, what price should be charged in order to maximizeprofits?
A. $7
B. $8
C. $9
D. $6
Question 16
Red Rock Company sells a single product that has variable costsof $14 per unit. Fixed costs will remain constant across all levelsof sales shown.
Units Sold | Price per Unit |
80,000 | $35 |
90,000 | $33 |
100,000 | $31 |
110,000 | $29 |
120,000 | $27 |
What price should Red Rock charge to maximize profits?
| A. | $33 | |
| B. | $29 | |
| C. | $31 | |
| D. | $27 | |
| E. | $35 |
2 points
Question 17
Core Manufacturing makes a single product. Budget informationregarding the current period is given below:
| Revenue (100,000 units at $8.00) | $800,000 |
| Direct materials | $170,000 |
| Direct labor | 125,000 |
| Variable manufacturing overhead | 235,000 |
| Fixed manufacturing overhead | 110,000 | 640,000 |
| Net income | $160,000 |
Deer Company approaches Core with a special order for 15,000 unitsat a price of $8.50 per unit. Variable costs will be the same asthe current production and accepting the special order will nothave any impact on the rest of the company's orders. However, Coreis operating at capacity and will incur an additional $55,000 infixed manufacturing overhead if the order is accepted. What is theincremental income (loss) associated with accepting the specialorder?
| A. | $48,000 | |
| B. | ($7,000) | |
| C. | $134,500 | |
| D. | ($23,500) |
2 points
Question 18
Jackson Company is trying to determine the optimal price tocharge for its PUNCH model. Jackson has fixed costs of $50,000 andthe PUNCH has variable costs of $12.00 per unit. Jackson hasdetermined that the following relationships exist between price anddemand:
Price | Demand |
$20 | 6,875 |
$19 | 8,800 |
$18 | 10,000 |
$17 | 11,000 |
What is the contribution margin for a price of $20?
| A. | $12.00 | |
| B. | $8.00 | |
| C. | $10.00 | |
| D. | $6.00 |
Question 21
Wharton Company has the capacity to produce 50,000 units peryear. The company sells each unit for $125. Budgeted information isas follows:
| Revenues | $5,612,000 |
| Direct materials | $1,932,000 |
| Direct labor | 552,000 |
| Manufacturing overhead (fixed) | 276,000 |
| Manufacturing overhead (variable) | 552,000 | 3,312,000 |
| Total | $2,300,000 |
A special order has been received for 5,000 units to be sold for$80 per unit. The company would incur an additional $60,000 intotal fixed costs in order to lease a special machine in order tomake a slight modification to the original product. Should thecompany accept the special order?
| A. | Yes, the revenue will increase substantially. | |
| B. | No, total costs would increase by $303,600. | |
| C. | Yes, profit will increase by $36,400. | |
| D. | No, accepting this order would decrease profits to$2,263,600. |
2 points
Question 22
Billings Company sells one product with a variable cost of $4per unit. The company is unsure what price to charge in order tomaximize profits. The price charged will also affect the demand asshown below.
Units Sold | Price |
20,000 | $9 |
30,000 | $8 |
35,000 | $7 |
50,000 | $6 |
If fixed costs are $100,000 and the chart represents the demand atvarious prices, what price should be charged in order to maximizeprofits?
| A. | $7 | |
| B. | $8 | |
| C. | $9 | |
| D. | $6 |
Related questions
Exercise 12-9 Special Order [LO12-4]
Delta Company produces a single product. The cost of producingand selling a single unit of this product at the companyâs normalactivity level of 91,200 units per year is: |
| Direct materials | $ | 1.80 | |
| Direct labor | $ | 3.00 | |
| Variable manufacturing overhead | $ | .90 | |
| Fixed manufacturing overhead | $ | 4.55 | |
| Variable selling and administrative expenses | $ | 1.80 | |
| Fixed selling and administrative expenses | $ | 2.00 | |
The normal selling price is $24 per unit. The companyâs capacityis 120,000 units per year. An order has been received from amail-order house for 2,400 units at a special price of $21.00 perunit. This order would not affect regular sales. |
| Required: |
| 1. | If the order is accepted, by how much will annual profits beincreased or decreased? (The order will not change the companyâstotal fixed costs.) |
| 2. | Assume the company has 500 units of this product left over fromlast year that are inferior to the current model. The units must besold through regular channels at reduced prices. What unit cost isrelevant for establishing a minimum selling price for these units?(Round your answer to 2 decimal places.) |
| Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companyâs normal activity level of 97,200 units per year is: |
| Direct materials | $ | 2.40 | |
| Direct labor | $ | 2.00 | |
| Variable manufacturing overhead | $ | .90 | |
| Fixed manufacturing overhead | $ | 4.55 | |
| Variable selling and administrative expenses | $ | 1.80 | |
| Fixed selling and administrative expenses | $ | 1.00 | |
| The normal selling price is $25 per unit. The companyâs capacity is 109,200 units per year. An order has been received from a mail-order house for 1,000 units at a special price of $22.00 per unit. This order would not affect regular sales.
|
