56.

Assume a company is considering adding a new product line with the following estimated cost and revenue data:

Annual sales		6,000	units
Selling price per unit	$	180
Variable manufacturing costs per unit	$	140
Variable selling costs per unit	$	15
Incremental fixed manufacturing costs	$	65,000	per year
Incremental fixed selling costs	$	40,000	per year
Allocated common fixed administrative costs	$	45,000	per year

If the new product line is added, the company expects that it will increase the sales of complementary products, thereby generating $30,500 in incremental contribution margin from those products. What is the financial advantage (disadvantage) of adding the new product line?

Multiple Choice

• $75,500

• $30,500

• $45,000

• $115,500

57.

Assume the following budgeted information for a merchandising company:

• Budgeted sales (all on credit) for November, December, and January are $251,000, $221,000, and $212,000, respectively.
• Cash collections of credit sales are expected to be 75% in the month of sale and 25% in the month following the sale.
• The cost of goods sold is always 70% of sales.
• Each months ending inventory equals 20% of next months cost of goods sold.
• 30% of each months merchandise purchases are paid in the current month and the remainder is paid in the following month.
• Monthly selling and administrative expenses that are paid in cash in the month incurred total $26,500.
• Monthly depreciation expense is $26,000.

The expected cash collections from customers in December are:

Multiple Choice

• $218,750.

• $248,750.

• $233,060.

• $228,500.

58.

Assume the following (1) selling price per unit = $25, (2) variable expense per unit = $13, (3) the total fixed expenses = $20,000, and (4) net operating income = $17,800. Given these four assumptions, unit sales must be:

Multiple Choice

• 3,780 units.

• 1,200 units.

• 2,378 units.

• 3,150 units.

59.

Assume that a company expects to produce 11,400, 12,400, and 14,400 units of finished goods in January, February, and March, respectively. Each unit of finished goods requires 3 pounds of raw material and each pound of raw material costs $4.50. The company always maintains an ending raw materials inventory equal to 20% of next months production needs. What is the amount of expected raw materials purchases for February?

Multiple Choice

• $134,400

• $172,800

• $169,200

• $122,520

60.

Assume that the actual amount of one of a companys variable expenses was $45,198. The companys planned level of activity was 19,000 machine-hours, and its actual level of activity was 18,325 machine-hours. The spending variance for this particular expense was $9,114 favorable. The cost formula per machine-hour for this expense is:

Multiple Choice

• $2.96.

• $1.94.

• $2.90.

• $1.98.