Elhard Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 40,000 units per month is as follows:

The normal selling price of the product is $51.10 per unit.

An order has been received from an overseas customer for 2,000 units to be delivered this month at a special discounted price. This order would have no effect on the company’s normal sales and would not change the total amount of the company’s fixed costs. The variable selling and administrative expense would be $0.10 less per unit on this order than on normal sales.

Direct labor is a variable cost in this company.

90. Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $41.60 per unit. By how much would this special order increase (decrease) the company’s net operating income for the month?

A. $2,000

B. $25,200

C. $(8,400)

D. $(18,800)

91. Suppose the company is already operating at capacity when the special order is received from the overseas customer. What would be the opportunity cost of each unit delivered to the overseas customer?

A. $5.40

B. $5.30

C. $9.50

D. $22.00

92. Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 200 units for regular customers. The minimum acceptable price per unit for the special order is closest to:

A. $38.80

B. $31.20

C. $51.10

D. $45.80

The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom at that activity level are:

The regular selling price for one Hom is $60. A special order has been received at Varone from the Fairview Company to purchase 8,000 Homs next year at 15% off the regular selling price. If this special order were accepted, the variable selling expense would be reduced by 25%. However, Varone would have to purchase a specialized machine to engrave the Fairview name on each Hom in the special order. This machine would cost $12,000 and it would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.

93. If Varone can expect to sell 32,000 Homs next year through regular channels and the special order is accepted at 15% off the regular selling price, the effect on net operating income next year due to accepting this order would be a:

A. $52,000 increase

B. $80,000 increase

C. $24,000 decrease

D. $68,000 increase

94. If Varone can expect to sell 32,000 Homs next year through regular channels, at what special order price from Fairview should Varone be economically indifferent between either accepting or not accepting this special order?

A. $51.00

B. $48.20

C. $42.50

D. $39.60

95. If Varone has an opportunity to sell 37,960 Homs next year through regular channels and the special order is accepted for 15% off the regular selling price, the effect on net operating income next year due to accepting this order would be a:

A. $33,320 decrease

B. $33,320 increase

C. $35,480 decrease

D. $35,480 increase

The Immanuel Company has just obtained a request for a special order of 6,000 jigs to be shipped at the end of the month at a selling price of $7 each. The company has a production capacity of 90,000 jigs per month with total fixed production costs of $144,000. At present, the company is selling 80,000 jigs per month through regular channels at a selling price of $11 each. For these regular sales, the cost for one jig is:

If the special order is accepted, Immanuel will not incur any selling expense; however, it will incur shipping costs of $0.30 per unit. Total fixed production cost would not be affected by this order.

96. If Immanuel accepts this special order, the change in monthly net operating income will be a:

A. $12,600 increase

B. $14,400 increase

C. $3,600 increase

D. $1,800 increase

97. At what selling price per unit should Immanuel be indifferent between accepting or rejecting the special offer?

A. $7.40

B. $7.70

C. $6.40

D. $4.90

98. Suppose that regular sales of jigs total 85,000 units per month. All other conditions remain the same. If Immanuel accepts the special order, the change in monthly net operating income will be:

A. $14,400 increase

B. $7,200 increase

C. $3,600 decrease

D. $5,400 decrease

Mckerchie Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as G62. Data concerning this product are given below:

The above per unit data are based on annual production of 9,000 units of the component. Direct labor can be considered to be a variable cost.

99. The company has received a special, one-time-only order for 300 units of component G62. There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order. Assuming that Mckerchie has excess capacity and can fill the order without cutting back on the production of any product, what is the minimum price per unit on the special order below which the company should not go?

A. $26

B. $67

C. $55

D. $160

100.The company has received a special, one-time-only order for 300 units of component G62. There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order. However, assume that Mckerchie has no excess capacity and this special order would require 50 minutes of the constraining resource, which could be used instead to produce products with a total contribution margin of $6,900. What is the minimum price per unit on the special order below which the company should not go?

A. $90

B. $23

C. $49

D. $78

101.Refer to the original data in the problem. What is the current contribution margin per unit for component G62 based on its selling price of $160 and its annual production of 9,000 units?

A. $28

B. $134

C. $93

D. $132

The constraint at Dalbey Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:

102.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. WP, FE, MB

B. FE, WP, MB

C. FE, MB, WP

D. MB, FE, WP

103.Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of this constrained resource?

A. $12.50 per minute

B. $29.96 per unit

C. $10.70 per minute

D. $71.92 per unit

Marrin Corporation makes three products that use the current constraint-a particular type of machine. Data concerning those products appear below:

104.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. KZ, XB, ZP

B. ZP, KZ, XB

C. XB, ZP, KZ

D. KZ, ZP, XB

105.Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource?

A. $14.30 per minute

B. $14.80 per minute

C. $33.81 per unit

D. $118.69 per unit

Cress Company makes four products in a single facility. Data concerning these products appear below:

The milling machines are potentially the constraint in the production facility. A total of 11,500 minutes are available per month on these machines.

106.How many minutes of milling machine time would be required to satisfy demand for all four products?

A. 12,000

B. 10,800

C. 9,000

D. 11,500

107.Which product makes the LEAST profitable use of the milling machines?

A. Product A

B. Product B

C. Product C

D. Product D

108.Which product makes the MOST profitable use of the milling machines?

A. Product A

B. Product B

C. Product C

D. Product D

109.Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Round off to the nearest whole cent.)

A. $7.46

B. $15.20

C. $19.40

D. $0.00

Broze Company makes four products in a single facility. These products have the following unit product costs:

Additional data concerning these products are listed below.

The grinding machines are potentially the constraint in the production facility. A total of 53,600 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

110.How many minutes of grinding machine time would be required to satisfy demand for all four products?

A. 56,100

B. 40,900

C. 53,600

D. 13,000

111.Which product makes the LEAST profitable use of the grinding machines?

A. Product A

B. Product B

C. Product C

D. Product D

112.Which product makes the MOST profitable use of the grinding machines?

A. Product A

B. Product B

C. Product C

D. Product D

113.Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole cent.)

A. $35.90

B. $0.00

C. $8.58

D. $11.60

Dunford Company produces three products with the following costs and selling prices:

114.If Dunford has a limit of 20,000 direct labor hours but no limit on units sold or machine hours, then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:

A. X, Y, Z

B. Y, Z, X

C. X, Z, Y

D. Z, Y, X

115.If Dunford has a limit of 30,000 machine hours but no limit on units sold or direct labor hours, then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:

A. Y, Z, X

B. X, Y, Z

C. X, Z, Y

D. Z, X, Y

Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $50 to buy from farmers and $15 to crush in the company’s plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $20 or processed further for $19 to make the end product industrial fiber that is sold for $58. The beet juice can be sold as is for $41 or processed further for $23 to make the end product refined sugar that is sold for $58.

116.How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?

A. $(107)

B. $(4)

C. $9

D. $13

117.How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?

A. $(71)

B. $(6)

C. $(39)

D. $(21)

118.Which of the intermediate products should be processed further?

A. beet fiber should NOT be processed into industrial fiber; beet juice should be processed into refined sugar

B.beet fiber should NOT be processed into industrial fiber; beet juice should NOT be processed into refined sugar

C. beet fiber should be processed into industrial fiber; beet juice should be processed into refined sugar

D. beet fiber should be processed into industrial fiber; beet juice should NOT be processed into refined sugar

Resendes Refiners, Inc., processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $48 to buy from farmers and $16 to crush in the company’s plant. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $24 or processed further for $17 to make the end product industrial fiber that is sold for $38. The cane juice can be sold as is for $34 or processed further for $23 to make the end product molasses that is sold for $76.

119.How much profit (loss) does the company make by processing one batch of sugar cane into the end products industrial fiber and molasses?

A. $16

B. $(104)

C. $(6)

D. $10

120.How much profit (loss) does the company make by processing the intermediate product cane juice into molasses rather than selling it as is?

A. $3

B. $19

C. $(45)

D. $(13)