Question 1

Bob's Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits?

Units Sold             Price

  30,000               $10

  40,000                $9

  50,000                $8

  60,000                $7

Question 2

A retailer purchased some trendy clothes that have gone out of style and must be marked down to 30% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation?

Question 3

Carlton Products Company has analyzed the indirect costs associated with servicing its various customers in order to assess customer profitability. Results appear below:

If all costs were assigned to customers based on the number of items ordered, what would be the cost per item ordered?

Question 4

Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton Company has approached Costa about buying 2,000 units for only $300 each. The units would be packaged in bulk, saving Costa $20 per unit when compared to the normal packaging cost. Normally, Costa has a variable cost of $280 per unit. The annual fixed cost of $2,000,000 would be unaffected by the special order. What would be the impact on profits if Costa were to accept this special order?

Question 5

A company has $6.40 per unit in variable costs and $4.50 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.59, what price should be charged if 65,000 units are expected to be sold?

Question 6

Customer profitability analysis might result in:

dropping some customers that are unprofitable.

lowering price or offering incentives to profitable customers.

giving incentives to all customers to place orders online.

All of the above.