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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

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M916465

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