Q1) Anderson Manufacturing produces single product. Budget information regarding present 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 special order for 15,000 units at price of $7.50 per unit. Variable costs will be same as present production and accepting special order will not have any impact on rest of the company's orders. Though, Anderson is operating at capacity and will acquire the extra $50,000 in fixed manufacturing overhead if order is accepted..
i) Find out incremental income (loss) associated with accepting special order?
A) ($14,000)
B) $36,000
C) ($23,500)
D) $27,000
ii) Find out the incremental revenue associated with accepting the special order?
A) $170,000
B) $112,500
C) $70,000
D) $120,000
2) Dynamaco Company uses cost-plus pricing with a 50% mark-up. Company is at present selling 100,000 units at $12 per unit. Each unit has variable cost of $6. Additionally, company acquires $200,000 in fixed costs annually. If demand falls to 80,000 units and company wishes to continue to earn a 50% return, what price must company charge?
A) $12.75
B) $14.55
C) $13.50
D) $10.95