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Munafo Corporation is a specialty component manufacturer with idle capacity. Management would like to use its extra capacity to generate additional profits. A potential customer
Munafo Corporation is a specialty component manufacturer with idle capacity. Management would like to use its extra capacity to generate additional profits. A potential customer has offered to buy 6,500 units of component VGI. Each unit of VGI requires 1 unit of material 157 and 5 units of material M97. Data concerning these two materials follow: Material Units in Stock Original Cost Per Unit $9.10 $4.70 Current Market Disposal Value Per Price Per Unit Unit $9.40 $8.95 $4.70 $3.50 157 M97 2,400 33,960 Material 157 is in use in many of the company's products and is routinely replenished. Material M97 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up. What would be the relevant cost of the materials, in total, for purposes of determining a minimum acceptable price for the order for product VGI? $213,130 $213,850 $171,925 $174,850 Lusk Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be: ($40,000) ($30,000) $30,000 $40,000
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