#18

Balser Corporation manufactures and sells a number of products, including a product called JYMP. Results for last year for the manufacture and sale of JYMPs are as follows:

Sales				$	960,000
Less expenses:
Variable production costs	$	464,000
Sales commissions		144,000
Salary of product manager		100,000
Fixed product advertising		160,000
Fixed manufacturing overhead		132,000			1,000,000
Net operating loss				$	(40,000	)

Balser is trying to decide whether to discontinue the manufacture and sale of JYMPs. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable.

Assume that dropping Product JYMP will have no effect on other products. The annual financial advantage (disadvantage) for the company of eliminating this product should be:

Garrison 16e Rechecks 2017-12-15, 2017-12-19

Multiple Choice

$40,000

($172,000)

($132,000)

($92,000)

#19

The Wester Corporation produces three products with the following costs and selling prices:

	Product
	A		B		C
Selling price per unit	$	21	$	12	$	32
Variable cost per unit	$	11	$	7	$	18
Fixed cost per unit		5		3		9
Direct labor hours per unit		0.4		0.1		0.7
Machine hours per unit		0.2		0.5		0.2

The company has insufficient capacity to fulfill all of the demand for these three products.

If machine hours are the constraint, then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:

Multiple Choice

A, B, C

A, C, B

C, A, B

B, C, A