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During 2016, Seth Britain Lab supplied hospitals with a comprehensive diagnostic kit for $160. At a volume of 75,000 kits, Seth had fixed costs of
During 2016, Seth Britain Lab supplied hospitals with a comprehensive diagnostic kit for $160. At a volume of 75,000 kits, Seth had fixed costs of $1,110,000 and a profit before income taxes of $390,000. Due to an adverse legal decision, Seth's 2017 liability insurance increased by $1,500,000 over 2016. Assuming the volume and other costs are unchanged, what should the 2017 price be if Seth is to make the same $390,000 profit before income taxes? (CPA adapted) $165.20. $180.00 O $205.20. O $320.00. The following pertains to Upton Co. for the year ending December 31, 2016: Budgeted Sales Break-even Sales Budgeted Contribution Margin Cashflow Break-even $1,220,000 850,000 750,000 275,000 Upton's margin of safety is: (CPA adapted) O $370,000. $470,000. $575,000. $945,000. If an organization's fixed costs are $2,400, tax rate is 40%, and contribution margin is $5,200, then its after-tax operating profits are $1,680. True O False The Crispy Baking Company is considering the expansion of its business into door-to-door delivery service. This would require an additional $13,900 in labor costs per month. Company-owned vehicles now used to make morning deliveries to restaurants could be used in the afternoons to make the home deliveries. However, it is estimated that an additional $6,400 would be required per month for gas, oil, and maintenance. It is further estimated that the home delivery use of the trucks would be allocated 45% of the existing $7,300 fixed vehicle costs. What is the differential delivery cost per month for expanding into the home delivery market? $13,900. $20,300. $23,180. $23,585. When deciding whether or not to accept a special order, a decision-maker should focus on differential costs instead of full costs. True O False
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