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Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow: Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Total $480,000 355,000 125,000 76,000 $49,000 Hiking $340,000 235,000 105,000 38,000 $67,000 Fashion $140,000 120,000 20,000 38,000 ($18,000) Assuming fixed costs remain unchanged, how would discontinuing the Fashion line affect operating income? O A. Decrease in total operating income of $140,000 O B. Increase in total operating income of $29,000 O C. Increase in total operating income of $125,000 OD. Decrease in total operating income of $20,000 Comfort Cloud manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but currently produces and sells 75,000 seats per year. The following information relates to current production: (Click the icon to view the data.) If a special sales order is accepted for 2,700 seats at a price of $350 per unit, fixed costs increase by $6,600, and variable marketing and administrative costs for that order are $1 per unit, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) i Data Table O A. Increase by $290,400 OB. Decrease by $287,700 O C. Increase by $294,300 OD. Increase by $287,700 Sales price per unit S430 Variable costs per unit: Manufacturing Marketing and administrative S240 $80 Total fixed costs: Manufacturing Marketing and administrative $760,000 $220,000 Print Done Click to enlar g e Buzz Appliances manufactures two products: Food Processors and Espresso Machines. The following data are available: Sales price Variable costs Food Processors $125 $80 Espresso Makers $225 $190 The company can manufacture either two food processors per machine hour or three espresso machines per machine hour. The company's production capacity is 1,600 machine hours per month. To maximize profits, what product and how many units should the company produce in a month (assuming unlimited demand for both products)? O A. 90 Food Processors and 105 Espresso Machines OB. 4,800 Espresso Machines and 0 Food Processors O C. 3,200 Food Processors and 4,800 Espresso Machines OD. 3,200 Food Processors and 0 Espresso Machines Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 50,000 parts is $170,000, which includes fixed costs of $80,000 and variable costs of $90,000. By outsourcing the part, the company can avoid 70% of the fixed costs. If Harvey Automobiles buys the part, what is the most Harvey Automobiles can spend per unit so that operating income equals the operating income from making the part? O A. $2.92 O B. $1.60 O C. $3.88 OD. $3.40 To maximize profits, produce the product with the lowest contribution margin per unit of the constraint. O O True False Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow: Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Total $480,000 355,000 125,000 76,000 $49,000 Hiking $340,000 235,000 105,000 38,000 $67,000 Fashion $140,000 120,000 20,000 38,000 ($18,000) Assuming fixed costs remain unchanged, how would discontinuing the Fashion line affect operating income? O A. Decrease in total operating income of $140,000 O B. Increase in total operating income of $29,000 O C. Increase in total operating income of $125,000 OD. Decrease in total operating income of $20,000 Comfort Cloud manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but currently produces and sells 75,000 seats per year. The following information relates to current production: (Click the icon to view the data.) If a special sales order is accepted for 2,700 seats at a price of $350 per unit, fixed costs increase by $6,600, and variable marketing and administrative costs for that order are $1 per unit, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) i Data Table O A. Increase by $290,400 OB. Decrease by $287,700 O C. Increase by $294,300 OD. Increase by $287,700 Sales price per unit S430 Variable costs per unit: Manufacturing Marketing and administrative S240 $80 Total fixed costs: Manufacturing Marketing and administrative $760,000 $220,000 Print Done Click to enlar g e Buzz Appliances manufactures two products: Food Processors and Espresso Machines. The following data are available: Sales price Variable costs Food Processors $125 $80 Espresso Makers $225 $190 The company can manufacture either two food processors per machine hour or three espresso machines per machine hour. The company's production capacity is 1,600 machine hours per month. To maximize profits, what product and how many units should the company produce in a month (assuming unlimited demand for both products)? O A. 90 Food Processors and 105 Espresso Machines OB. 4,800 Espresso Machines and 0 Food Processors O C. 3,200 Food Processors and 4,800 Espresso Machines OD. 3,200 Food Processors and 0 Espresso Machines Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 50,000 parts is $170,000, which includes fixed costs of $80,000 and variable costs of $90,000. By outsourcing the part, the company can avoid 70% of the fixed costs. If Harvey Automobiles buys the part, what is the most Harvey Automobiles can spend per unit so that operating income equals the operating income from making the part? O A. $2.92 O B. $1.60 O C. $3.88 OD. $3.40 To maximize profits, produce the product with the lowest contribution margin per unit of the constraint. O O True False
