Question 1

A company is considering dropping a product line. Data from the companys budget for the upcoming year for this product line appear below:

Sales Revenue:	$541,000
Variable costs:	$163,000
Fixed manufacturing costs:	$223,000
Fixed selling and administrative costs:	$110,000

Further investigation has revealed that 42% of the fixed manufacturing costs and 12% of the fixed selling and administrative expenses are avoidable if the product were discontinued.

What would be the total annual financial impact from eliminating this product?

(Make sure to calculate the total impact, not the per-unit amount. Use a negative number to indicate a reduction in cash flows.)

Flag question: Question 2Question 2

ABC Co. produces vacuums. An outside supplier has offered to make the 7,000 vacuum motors needed each year. The company provides the following per-unit cost information for vacuum motors, assuming a production level of 7,000:

Direct materials:	$23
Direct labor:	$14
Variable manufacturing overhead:	$4
Factory Supervisor Salary:	$27
Depreciation of Special Equipment:	$2
Allocated General Overhead:	$15

Additional information:

• ABC will keep the factory supervisor regardless of whether vacuum motor production is outsourced.
• If vacuum motor production is outsourced, the special equipment will be discarded and the allocated general overhead can be reduced by 50%.

What is the maximum price per motor that this company should be willing to pay to purchase the vacuum motors from the outside supplier? (Round to the nearest dollar and cents.)

Flag question: Question 3Question 3

XYZ Industries manufactures 15,000 components per year. The total manufacturing costs for this level of production were determined as follows:

Direct Materials	$117,000
Direct Labor	$159,000
Variable manufacturing overhead	$40,000
Fixed manufacturing overhead	$92,000

An outside supplier has offered to produce all 15,000 units of the component and sell it to XYZ for $13 per unit. Additional information:

• If XYZ purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $65,000 per year.
• XYZ has determined that no fixed manufacturing overhead could be avoided by purchasing the component from the supplier.

What is the total annual financial impact of purchasing the component from the supplier instead of manufacturing it themselves?

(Make sure to calculate the total impact, not the per-unit amount. Use a negative number to indicate a reduction in cash flows.)

Flag question: Question 4Question 4

A company makes a single product that is normally sells for $59/unit. It has the capacity to produce 100,000 units per year, but currently produces only 70,000. Per-unit costs associated with the product at an annual production level of 70,000 are below:

Variable production cost per unit $15

Variable selling cost per unit $20

Fixed production cost per unit $8

Fixed selling cost per unit $13

A foreign distributor wants to buy 2,000 units and has offered to pay $35 each. Additional information:

• If the company accepts this order, it would incur $10,000 in additional legal costs to comply with export regulations.
• No selling costs would be incurred for this order.

What would be the total financial impact of accepting this offer?

(Make sure to calculate the total impact, not the per-unit amount. Use a negative number to indicate a decrease in cash flows.)

Flag question: Question 5Question 5

A company produces and sells three products.

	Product 1	Product 2	Product 3
Selling price per unit	$70	$100	$200
Contribution margin per unit	$50	$74	$80
Fixed cost per unit	$10	$14	$25
Machine hours per unit	5	5	10

This company has enough machine hours to make as many units as it can sell of its two most profitable products.

If the company has the opportunity to rent as many more machine hours as it needs, what is the most it would be willing to pay per machine hour?

(Round to the nearest dollar and cents.)