W5 A2 13 - 15

13.

Banfield Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below: VP YI WX

Selling price per unit $248.04 $230.66 $505.44

Variable cost per unit $190.71 $172.14 $388.80

Centiliters of compound W 3.90 3.80 8.10 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. A wx,vp,yi B yi, vp, wx C wx, yi, vp D vp, wx, yi

14.

Ouzts Corporation is considering two alternatives: A and B. Costs associated with the alternatives listed below:

	Alternative A	Alternative B
Materials costs	$40,000	$56,000
Processing costs	$37,000	$37,000
Equipment rental	$13,000	$13,000
Occupancy costs	$15,000	$22,000

Are the materials costs and processing costs relevant in the choice between alternatives A and B? (Ignore the equipment rental and occupancy costs in this question.) A both materials costs and processing cost are relevent B neither materials costs nor processing costs are relevant C only processing costs are relevant D only materials costs are relevant

15. The Draper Company is considering dropping its Doombug toy due to continuing losses. Revenue and costs data on the toy for the past year follow: Sales of 15,000 units $150,000 less Variable expenses $120,000 = Contribution margin $30,000 less Fixed expenses $40,000 = Net operating loss ($10,000) If the toy were discontinued, then Draper could avoid $8,000 per year in fixed costs. Under the given conditions, the change in annual operating income from discontinuing the production and sale of Doombugs would be: A $30,000 decrease B $10,000 increase $22,000 decrease D $18,000 increase