QUESTION 38 Ace Company has two product lines The following income statements are shown for its two product lines and the company as a whole Office Supplies Computer Total Sales $250,000 $360,000 $610,000 Less Variable expenses 100,000 265,000 365,000 Contribution margin $150,000 $95,000 $245,000 Less Fixed expenses 70,000 150,000 220,000 Operating income $80,000 (55,000) $25,000 Additional information Management estimates that the dropping of the Computer product line would result in a 10 decrease in sales in the Office Supplies product line If the Computer product line is dropped, 80 of the Computer product lines fixed expenses will be eliminated If the Computer product line is dropped, the companys profit will A Increase by $55,000 B Decrease of $58,000 C Increase by $10,000 D Decrease by $25,000 4 points QUESTION 39 Faxaco has the following cost information regarding a component to be used in making its product, fax machine The company has a capacity of manufacturing the component up to 900 units The manufacturing costs for making 900 units are Direct materials and labor $1,800 ($2 per unit) Variable overhead $2,700 ($3 per unit) Fixed overhead $9,000 ($10 per unit) $40 of fixed overhead would continue, even though the component is purchased from outside If the component is not manufactured, the facilities can be rented for $7,200 An outside vendor , Fast Company has offered to provide Faxaco with the component for $16 each Faxaco is making a Make or Buy decision Compared to Make , Buy is A $6,300 worse B $900 better C $2,400 worse D $900 worse E $2,700 better QUESTION 40 Green Company makes a product, BG2 It has a production capacity of 1,000 units, and it can sell all of 1,000 units in the regular market The regular selling price is $80 each Green has received a request from Tom for a special order of 100 units of BG2 Tom wants to pay $ 45 per unit No variable selling cost would be incurred for this order The following is the per unit cost information Variable manufacturing $23 Fixed manufacturing $15 Unit manufacturing cost $38 Variable selling $3 Fixed selling $9 Unit selling cost $12 Total cost $50 based on production and sales of 1,000 units If Green accepts Toms order, Green's income will be than income associated with rejecting Tom's order A $2,500 higher B $3,500 lower C $3,200 lower D $2,200 higher E $5,000 lower 4 points QUESTION 41 Use the information given in the above question For the best interest of Green, what is the minimum price (per unit) that Green should charge to Tom A $23 B $50 C $26 D $77 E $80

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QUESTION 38 Ace Company has two product lines. The following income statements are shown for its two product lines and the company as a whole:

QUESTION 38

Ace Company has two product lines. The following income statements are shown for its two product lines and the company as a whole:

	Office Supplies	Computer	Total
Sales	$250,000	$360,000	$610,000
Less: Variable expenses	100,000	265,000	365,000
Contribution margin	$150,000	$95,000	$245,000
Less: Fixed expenses	70,000	150,000	220,000
Operating income	$80,000	(55,000)	$25,000

Additional information:

* Management estimates that the dropping of the Computer product line would result in a 10% decrease in sales in the Office Supplies product line.

* If the Computer product line is dropped, 80% of the Computer product lines fixed expenses will be eliminated.

If the Computer product line is dropped, the companys profit will:

	A.	Increase by $55,000
	B.	Decrease of $58,000
	C.	Increase by $10,000
	D.	Decrease by $25,000

4 points

QUESTION 39

Faxaco has the following cost information regarding a component to be used in making its product, fax machine. The company has a capacity of manufacturing the component up to 900 units. The manufacturing costs for making 900 units are:

Direct materials and labor $1,800 ($2 per unit)

Variable overhead $2,700 ($3 per unit)

Fixed overhead $9,000 ($10 per unit)

$40% of fixed overhead would continue, even though the component is purchased from outside.

If the component is not manufactured, the facilities can be rented for $7,200.

An outside vendor, Fast Company has offered to provide Faxaco with the component for $16 each. Faxaco is making a Make or Buy decision. Compared to "Make", "Buy" is:

A.
$6,300 worse

B.
$900 better.

C.
$2,400 worse

D.
$900 worse.

E.
$2,700 better.

QUESTION 40

Green Company makes a product, BG2. It has a production capacity of 1,000 units, and it can sell all of 1,000 units in the regular market. The regular selling price is $80 each.

Green has received a request from Tom for a special order of 100 units of BG2. Tom wants to pay $ 45 per unit. No variable selling cost would be incurred for this order.

The following is the per-unit cost information:

Variable manufacturing	$23
Fixed manufacturing	$15*
Unit manufacturing cost	$38

Variable selling	$3
Fixed selling	$9*
Unit selling cost	$12

Total cost	$50

* based on production and sales of 1,000 units

If Green accepts Toms order, Green's income will be _____ than income associated with rejecting Tom's order.

	A.	$2,500 higher
	B.	$3,500 lower
	C.	$3,200 lower
	D.	$2,200 higher
	E.	$5,000 lower

4 points

QUESTION 41

Use the information given in the above question. For the best interest of Green, what is the minimum price (per unit) that Green should charge to Tom?

A.
$23

B.
$50

C.
$26

D.
$77

E.
$80