AMCR Inc. incurs the following manufacturing costs for each unit of its single product: Direct materials $36 Direct labor $16 Variable manufacturing $30 overhead Fixed manufacturing $18 overhead In addition, the company incurs fixed selling costs of $600,000 per year and variable selling costs of $10 per unit sold. The company has the capacity to produce 600,000 units per year and expects to produce 400,000 units in the coming year. The product's selling price is normally $140 per unit, but a customer has offered to buy 60,000 units at a discounted price of $100 per unit. If AMCR Inc. accepts the special order, then what will be the effect on its operating income? $540,000 decrease in operating income O $360,000 decrease in operating income O $480,000 increase in operating income $360,000 increase in operating income O None of the above GEV Inc. produces two types of pre-emergent herbicide, original and premium, with contribution margins per package of $13 and $21, respectively. Each package of herbicide requires processing time on special machines. The firm owns four of these machines that together provide 18,000 hours of machine time per year. Original herbicide requires 0.20 hours of machine time per package and premium herbicide requires 0.50 hours of machine time per package. What is the contribution margin per hour of machine time for one package of original herbicide? $26 O $65 O $16 O $104 None of the above Barrel and Crate Inc. makes a variety of porcelain sinks and tubs. The sinks sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable costs of $450. The sinks and tubs require the use of specialized molding equipment. The specialized molding equipment has 4,050 hours of capacity per year. A sink uses an average of 2 hours of specialized molding equipment time; a tub uses an average of 5 hours of specialized molding equipment time. Assuming specialized molding equipment time is the only constrained resource, and the company can sell as many tubs and sinks as it can produce, how many tubs should Barrel and Crate produce? 00 2,025 2,050 O 4.050 O None of the above Phone Company has the following costs of producing and selling a cell phone when it produces and sells 100,000 cell phones per month: Unit cost Direct materials $60.00 Direct labor $10.00 Variable manufacturing $35.00 overhead Fixed manufacturing $20.00 overhead Variable selling $20.00 and admin The normal selling price per phone is $250. Phone Company has been approached by a new customer, Sky Phone, with a one-time offer to purchase 10,000 customized cell phones at a 20% discount. This special order would not interfere with Phone Company's existing business. Although Phone Company would not incur variable selling costs associated with the special order, the firm would need to purchase additional equipment at a one-time cost of $150,000 to manufacture the customized phones. What is the financial advantage or disadvantage of accepting this special order? $800,000 advantage $800,000 disadvantage O $1,000,000 advantage O $950,000 disadvantage None of the above
