Professional Documents
Culture Documents
Search
COURSE TITLE
TYPE
UPLOADED BY
PAGES
University of Ph...
ECONOMIC 201
Test Prep
sereenenena
53
a. Product X:
Additional revenue ($17,700 - $15,500) = $2,200
Additional cost
= ($2,200)
Net profit
-0Product Y:
Additional revenue $23,000 - $18,000 =
Additional cost
=
Net loss
$5,000
$8,000
$(3,000)
Product Z:
Additional revenue $37,500 - $24,000 = $13,500
Additional cost
= ($11,500)
Net profit
$ 2,000
b. $15,500 + $18,000 + ($37,500 - $11,500) - $30,000 = $29,500
214
Page
46 / 53
This preview has intentionally blurred sections. Sign up to view the full version.
LEARNING OBJECTIVE 3
LEARNING OBJECTIVE 3
155.
Freedom Corporation has three departments. Data for the most recent year is presented
below:
X
Y
Z
Page
46 / 53
Sales
Variable expenses
Fixed expenses:
Unavoidable
Avoidable
$400
128
$200
52
$80
34
96
116
52
104
12
54
Required:
a. Compute the operating income of the company.
b. Compute the contribution margin and operating income of each department.
c. Should any department(s) be eliminated? If so, which one(s) and why?
Answer:
a. ($400 + $200 + $80) ($128 + $96 + $116 + $52 + $52 + $104 + $34 + $12 + $54) =
$32
b. X: $400 - $128 = $272 contribution margin
$272 - $212 = $60 operating income
Y: $200 - $52 = $148 contribution margin
$148 - $156 = $(8) operating loss
Z: $80 - $34 = $46 contribution margin
$46 - $66 = $(20) operating loss
Department Z should be eliminated. Sales revenue of $80 does not cover the
variable costs and the avoidable fixed costs, which total $88. By eliminating
this department, the operating income of the company will increase by $8.
215
156.
Linehan Company has three departments. Data for the most recent year is presented
below:
Sales
Variable expenses
Fixed expenses:
Unavoidable
Avoidable
Operating income (loss)
$4,000
3,280
$1,920
1,420
$2,240
520
480
555
180
265
440
360
(315)
55
920
C with a second Department T. This will double the sales of Department T without
Page
increasing fixed cost.
46 / 53
Answer:
216
This preview has intentionally blurred sections. Sign up to view the full version.
LEARNING OBJECTIVE 4
LEARNING OBJECTIVE 4
157.
Ring Company manufactures two tables, Small and Large. The following data is
available:
Small
Large
Page
46 / 53
$100
$68
3.2
$210
$138
10
$9,600
Ring Company can sell a maximum of 1,000 units of each size of table. Machine hour
capacity is 8,000 hours per year.
Required:
a. Which table has the higher contribution margin per unit?
b. Which table has the higher contribution margin per hour?
c. How many tables of each size should be produced to maximize income, and what is
the maximum income?
Answer:
a. The large table has the higher contribution margin per unit of $72 ($210 - $138).
b. The small table has the higher contribution margin per hour of $10 [($100 - $68)
/ 3.2 hours].
c. To maximize income, Ring Company should produce 1,000 small tables that
would use up 3,200 hours, and 480 large tables that would use the remaining
4,800 hours. This would produce an income of $56,960 calculated as follows:
1,000 units x $32
480 units x $72
=
=
$32,000
34,560
$66,560
$9,600
Net income
$56,960
217
158.
Top Inc. manufactures two products, Hats and Caps. The following information is
available:
Hats
Caps
$21
$12
3
$13
$9
1
$52,000
Page
46 / 53
This preview has intentionally blurred sections. Sign up to view the full version.
Page
46 / 53
This is the end of the preview. Sign up to access the rest of the document.
TERM
PROFESSOR
TAGS
Fall '13
caca
Opportunity Cost
Page
46 / 53
65 pages
HorngrenIMA14eTIF_ch09.doc
HorngrenIMA14eTIF_ch17.doc
University of Phoenix
University of Phoenix
Report
37 pages
12 pages
Page
46 / 53
HorngrenIMA14eTIF_ch11.doc
University of Phoenix
University of Phoenix
15 pages
75 pages
Human-Microbe Interactions.ppt
University of Phoenix
University of Phoenix
Study on the go
70 pages Page
59 pages
46 / 53
829 pages
Answer C T
Diff Easy O
University of Phoenix
University of Phoenix
Hightstown
ECONOMIC
Auditing an
Chapter 1 T
I cannot even describe how much Course Hero helped me this summer. Its truly become something
I can always rely on and help me. In the end, I was not only able to survive summer classes, but I
was able to thrive thanks to Course Hero.
Dana
University of Pennsylvania 17, Course Hero Intern
The ability to access any universitys resources through Course Hero proved invaluable in my case. I
was behind on Tulane coursework and actually used UCLAs materials to help me move forward and
get everything together on time.
Jill
Tulane University 16, Course Hero Intern
Page
46 / 53
Company
About Us
iOS
Blog
Android
Sitemap
Educators
Standardized Tests
Careers
Help
Our Team
Contact Us
Jobs
FAQ
Internship
Feedback
Legal
Connect with Us
Copyright Policy
Honor Code
Privacy Policy
Terms of Use