Crede Company sells a single product that has variable costs of $10 per unit. Fixed costs will be $700,000 across all levels of sales shown.
|
Units Sold
|
Price per unit
|
|
80,000
|
$35
|
|
90,000
|
$33
|
|
100,000
|
$31
|
|
110,000
|
$30
|
|
120,000
|
$28
|
Q1. What price should Crede charge to maximize profits?
A) $28
B) $30
C) $35
D) $31
E) $33
Q2. What price would Crede charge to maximize revenues?
A) $30
B) $31
C) $35
D) $28
E) $33
Q3. What, if any information given was not relevant to the profit maximization decision?
A) The variable costs per unit
B) The quantities demanded
C) All of the information was relevant
D) The selling prices
E) The total fixed costs
Anderson Manufacturing makes a single product. Budget information regarding the current period is given below:
|
Revenue (100,000 units at $8.00)
|
$800,000
|
|
Direct materials
|
150,000
|
|
Direct labor
|
125,000
|
|
Variable manufacturing overhead
|
235,000
|
|
Fixed manufacturing overhead
|
110,000
|
|
Net income
|
$180,000
|
Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders. However, Anderson is operating at capacity and will incur an additional $50,000 in fixed manufacturing overhead if the order is accepted.
Q4. What is the incremental income (loss) associated with accepting the special order?
A) ($14,000)
B) $36,000
C) ($23,500)
D) $27,000
Q5. What is the incremental revenue associated with accepting the special order?
A) $170,000
B) $112,500
C) $70,000
D) $120,000