1.Our company is a price taker and has the following information available for the current year:

• budgeted production, 200,000 units;
• desired operating income as a percentage of total assets, 15%;
• current market price of our product, $50 per unit; and
• total assets, $12,000,000.

What is thefull product costfor the year?

a. $1,500,000

b. $1,800,000

c. $8,200,000

d. $12,000,000

2.Our company is a price setter and has the following information available for the current year:

• budgeted sales volume, 200,000 units;
• desired operating income as a percentage of total assets, 16%;
• variable costs, $25 per unit;
• fixed costs, $4,000,000; and
• total assets, $12,000,000.

What is oursales price per unitif we used thecost-plus pricingapproach?

a. $49.60

b. $51.91

c. $54.60

d. $50.20

3.Our company manufactures and sells seven different products to different markets. Financial data for product x2 is as follows:

• revenue, $45,000;
• variable expenses, $35,000; and
• fixed expenses $15,000.

$12,000 of the fixed costs can be eliminated and there will be no adverse effect on sales of other products. What is the effect of dropping this product on the operating income of the company?

a. Operating income will increase by $2,000.

b. Operating income will decrease by $2,000.

c. Operating income will decrease by $7,000.

d. Operating income will increase by $7,000.

4.Our company manufactures a component used in the production of its products. Our costs to manufacture the part include

• direct materials, $25 per unit;
• direct labor, $20 per unit;
• variable factory overhead, $15 per unit;and
• fixed manufacturing overhead, $12 per unit.

A supplier has offered to sell us the part for $65 per unit. If ourcompany chooses to outsource, the fixed costs could be reduced by 55%. We would have no other use for the facilities currently employed in making the component. What would be the effect if ourcompany decides to outsource?

a. The effect on operating income is $0.

b. We would save $1.60 per unit.

c. Costs would increase by $1.60 per unit.

d. We would save $0.40 per unit.