6. Exhibit 5-2

Manchester Company is a small company that has hired you to help them estimate costs. They present you with the following information from the companys most recent fiscal year.

Sales (2,000 units) $1,000,000

Cost of goods sold (24% of sales) 240,000

Store supervisor's annual salary 65,000

Annual operating costs 70,000

Annual advertising and promotion 10,000

Sales commissions (5% of sales) 50,000

Refer to Exhibit 5-2. What was the variable cost per unit for the companys most recent fiscal year?

a. $120 per unit

b. $180 per unit

c. $145 per unit

d. $150 per unit

e. None of the answer choices is correct.

26. Refer to Exhibit 7-3. What are the total production costs if the hats are outsourced?

a. $130,000

b. $145,000

c. $100,000

d. $60,000

e. None of the answer choices is correct.

27. Refer to Exhibit 7-3. Which is the best alternative, producing internally or outsourcing?

a. Outsourcing the production of hats results in $15,000 in savings compared to internal production.

b. Outsourcing the production of hats results in $30,000 in savings compared to internal production.

c. Producing the hats internally results in $30,000 in savings compared to outsourcing production.

d. Producing the hats internally results in $15,000 in savings compared to outsourcing production.

e. None of the answer choices is correct.

Exhibit 7-4

The following segmented annual income statement is for Paper Products, Inc.

	Product Lines
	Plain	Lined	Color	Total
Sales revenue	$25,000	$100,000	$125,000	$250,000
Variable costs	15,000	50,000	85,000	150,000
Contribution margin	$10,000	$50,000	$ 40,000	$100,000
Direct fixed costs	4,000	6,000	9,000	19,000
Allocated fixed costs	?	?	?	45,000
Profit (loss)	$ ?	$ ?	$ ?	$ ?

28 Refer to Exhibit 7-4. If allocated fixed costs are based on sales revenue for each product line as a proportion of total sales revenue, what is the amount of allocated fixed costs for Plain?

a. $15,000

b. $6,000

c. $22,500

d. $4,500

e. None of the answer choices is correct.

29. Assume that you invest $10,000 today at an annual rate of five percent for three years. How much will you have at the end of three years (rounded to the nearest dollar)?

a. $11,576

b. $11,500

c. $10,000

d. $11,250

e. None of the answer choices is correct.

30.Assume that you invest $100,000 today at an annual rate of eight percent for four years. How much will you have at the end of four years (rounded to the nearest dollar)?

a. $132,000

b. $124,000

c. $125,971

d. $136,049

e. None of the answer choices is correct.