The condensed income statement for a business for the past year is presented as follows 6. Product Total Sales Less variable costs Contnbution magin Less fixed costs 180,000 320,000 160, 000 4700,000 200,000 480,000 200,000 120,000 80,00020,000 $120,000 220,000 40,000 95,000 30,000 25,000 (10,000)80,000 125,000 Income (loss) from oper 55,000 Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Products F and H. What is the amount of change in net income for the current year chat will result from the discontinuance of Product G? a. $10,000 increase b. $10,000 decrease c. $20,000 increase d. $20,000 decrease 7. What measures the amount of income that is foregone whem one altermative is selected over another. a differential income b. sunk cost c. differential revenue. d. opportunity cost Special order A business received an offer from an exporter for $,000 units of product at $8 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price Unit manufacturing costs: Variable S12 Fixed 8. What is the differential revenue from the acceptance of the offer? as20000 b. $40,000 . $45,000 d. $$0,000 . What is the differential cost from the acceptance of the offer? $5,000 b. $20,000 c. $40,000 d $45,000 10. What is the amount of gain or loss from acceptance of the offer? a $ 5,000 gain b. 5,000 loss c $10,000 loss d. $15,000 loss Make or Ru ColorPro Co manufactures 500 anits of part 69B in the prodaction of monitors. part 69B are: Unit manufacturing costs of Variable Manufacturing Cost $40 Fixed Manufacturing Cost 35 none of the fixed manufacturing costs can be eliminated 11. What is the sotal of all relevant costs a. $ 40,000 b. $ 7,325 c. $80.554 d. $ 9,000 e. $20,000 12. Variable costs are: a. Always fixed b. Always relevant e. Not applicable ever d. All of the above e. None of the above How to Determine Optimal Product Mix with One Constrained Resource Johnson Company produces two types of gears, A & B with unit contribution margins of $50 and $20 respectively. Each gear must be notched by a special machine. The firm owns eight machines that together provide 80,000 of machine time per gear. Gear A requires two hours of machine time and gear B requires 1 hour of machine time. Machine time is a constrained resourece 13. What is the contribution margin per hour of machine time for cach gear? a. Gear A S12.5/Gear B $10 b. Gear A $25 /Gear B $20 c. Gear A & B break even d. Gear A $50/ Gear B $40 Gear A $100/Gear B $80 e. 14. How should machine time be allocated to the gears a. Gear A 100% / Gear B 0% b. Gear A $100% / Gear B 80% Gear A & B evenly c. d. None to either Gear A 25% / Gear B 75% e
