Worthington Sailboats Company manufactures

100100

luxury yachts per month. Included in each yacht is a compact media center. Worthington Sailboats manufactures the media center

inminushouse.

The company is considering the possibility of outsourcing the production of the media centers in order to close down some of its facilities and reduce the administrative costs. At present, the variable cost per unit is

$ 275$275,

and fixed costs are

$ 47 comma 000$47,000

per month. Assume that if it outsources, fixed costs could be reduced by

6060%.

The production manager advised the company to contract with a foreign supplier who offered a contract cost of

$ 420$420

per unit. If it outsources the media center, how would that affect operating income?

A.

Operating income would improve by

$ 28 comma 200$28,200.

B.

Operating income would improve by

$ 13 comma 700$13,700.

C.

Operating income would decline by

$ 13 comma 700$13,700.

D.

Operating income would remain the same.

Macaulay Roller Skates has three product

lineslong dashD,

E, and F. The following information is available:

	D	E	F
Sales revenue	$ 90 comma 000$90,000	$ 50 comma 000$50,000	$ 30 comma 000$30,000
Variable costs	(40 comma 00040,000)	(15 comma 00015,000)	(12 comma 00012,000)
Contribution margin	$ 50 comma 000$50,000	$ 35 comma 000$35,000	$18 comma 00018,000
Fixed costs	(20 comma 00020,000)	(15 comma 00015,000)	(23 comma 00023,000)
Operating income (loss)	$ 30 comma 000$30,000	$ 20 comma 000$20,000	$(5 comma 0005,000)

The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if Macaulay drops product line F and does not replace it, what effect will this have on operatingincome?

A.

Operating income will increase

$ 23 comma 000$23,000.

B.

Operating income will decrease

$ 18 comma 000$18,000.

C.

Operating income will increase

$ 18 comma 000$18,000.

D.

Operating income will increase

$ 5 comma 000$5,000.

Dell Productions is a

priceminustaker.

The company produces large spools of electrical wire in a highly competitivemarket; thus, it uses target pricing. The current market price is

$ 825$825

per unit. The company has

$ 3 comma 000 comma 000$3,000,000

in average assets, and the desired profit is a return of

88%

on assets. Assume all products produced are sold. The company provides the following information:

Sales volume	110 comma 000110,000	units per year
Variable costs	$ 750$750	per unit
Fixed costs	$ 14 comma 000 comma 000$14,000,000	per year

Currently the cost structure is such that the company cannot achieve its profit objective and must cut costs. If fixed costs cannot be reduced, how much reduction in variable cost per unit will be needed to achieve the desired target? (Round your answer to the nearest cent.)

A.

reduction in variable cost per unit by

$ 52.27$52.27

B.

reduction in variable cost per unit by

$ 54.45$54.45

C.

reduction in variable cost per unit by $ 750.00$750.00

D.

reduction in variable cost per unit by $ 75.00$75.00