Question
A.) Two products, IF and RI, emerge from a joint process. Product IF has been allocated $18,300 of the total joint costs of $39,000. A
A.)
Two products, IF and RI, emerge from a joint process. Product IF has been allocated $18,300 of the total joint costs of $39,000. A total of 2,500 units of product IF are produced from the joint process. Product IF can be sold at the split-off point for $14 per unit, or it can be processed further for an additional total cost of $10,500 and then sold for $16 per unit. If product IF is processed further and sold, what would be the effect on the overall profit of the company compared with sale in its unprocessed form directly after the split-off point?
$25,800 less profit
$5,500 less profit
$29,500 more profit
$12,800 more profit
B.)
Tawstir Corporation has 500 obsolete personal computers that are carried in inventory at a total cost of $720,000. If these computers are upgraded at a total cost of $130,000, they can be sold for a total of $190,000. As an alternative, the computers can be sold in their present condition for $50,000.
Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition? |
$130
$770
$360
$270
C.)
Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 54,000 units per month is as follows:
Direct materials | $49.60 |
Direct labor | $9.50 |
Variable manufacturing overhead | $2.50 |
Fixed manufacturing overhead | $20.10 |
Variable selling & administrative expense | $4.60 |
Fixed selling & administrative expense | $22 |
The normal selling price of the product is $114.10 per unit. |
An order has been received from an overseas customer for 3,400 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $2.60 less per unit on this order than on normal sales. |
Direct labor is a variable cost in this company. |
Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $90.40 per unit. By how much would this special order increase (decrease) the company's net operating income for the month? |
$(72,000)
$22,780
$91,120
$(60,860)
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