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Sycamore Shops has a capacity of 50,000 units and is currently producing and selling 45,000 at $50 a unit. The present cost structure, on a per unit basis, is: Direct material $20 Direct labour 10 Variable overhead 6 Fixed overhead 8 An order for 7,000 units has been received from aJapanese company at a price of $45 per unit. The order size cannot be reduced. If the order is accepted, profit will: C\" A. Decrease by $35,000 C\" B. Not change C\" C. Increase by $63,000 C\" D. Increase by $35,000 The managers of Riverside Designs are considering dropping one of their product lines. The product line typically has the following revenue and costs: Sales $125,000 Variable costs m Contribution margin 40,000 Fixed costs i Operating loss $ (5,000) If the product line is discontinued, $4,000 of the xed costs would be avoided. Also, the freed-up capacity would generate $6,000 of additional contribution margin from the expansion of other product lines. If Riverside discontinues the product line, the effect on overall income will be C\" A. $10.000 increase C\"- B. $30,000 decrease C\"-C. $41,000 decrease C\" D. 1520.000 decrease Each year Wright's Widgets buys 10,000 subcomponents that it needs in the production of its widgets from an outside supplier for $15 each. If Wright instead used its existing idle capacity to produce it in-house, the variable production costs would be $8 per unit and $3 of fixed production overhead would be allocated to each unit. Additionally, Wright would need to hire one quality control technician for $28,000 per year. The excess capacity that would be required is currently leased to another company for $25,000 per year. What is the advantage or disadvantage if Wright continues to buy the subcomponent from the outside supplier? A A. $37,000 advantage A B. $13,000 advantage A C. $17,000 disadvantage A D. $3,000 disadvantage Courtney Company has equipment that is in high demand, but has a limited amount of time available. The equipment can be used to produce a number of different products. The following data are available: Product Unit Price Unit Variable Units Made Costs Per Hour L $400 $200 10 M $300 $150 25 N $600 $250 10 O $200 $100 16 Which product should be emphasized first? OA. O OB. N OC. L OD. M
