Question : 80.              Managers of Prestissimo Corporation thinking about eliminating one of : 1369899

80.              Managers of Prestissimo Corporation are thinking about eliminating one of their products, EasyGlo.  EasyGlo sells for $8 per unit.  Unit-related costs are $5, batch-related costs are $300 per batch, and 3 batches of EasyGlo have been required each month.  Prestissimo spends $3,000 each month to advertise EasyGlo.  Rent and insurance on the factory allocated to EasyGlo total $4,000.  If Prestissimo is currently producing and selling 1,500 units of EasyGlo each month, what is the relevant profit for the product-elimination decision?

A)$4,500

B)$3,600

C)$   600

D)($3,400)

81.              Managers of Pianissimo Corporation are thinking about eliminating one of their products, MoreGlo.  MoreGlo sells for $10 per unit.  Unit-related costs are $6, batch-related costs are $400 per batch, and 4 batches of MoreGlo have been required each month. Pianissimo spends $4,000 each month to advertise MoreGlo.  Rent and insurance on the factory allocated to MoreGlo total $2,000.  If Pianissimo is currently producing and selling 1,500 units of MoreGlo each month, it should not eliminate MoreGlo as long as relevant profit is at least

A)$1

B)$400

C)$2,000

D)$4,400

82.              Brio Company is considering eliminating a product line. If it eliminates the product, equipment, which originally cost $250,000, will be disposed of for $6,000.  The equipment has a book value of $75,000 and annual depreciation of $25,000.  Ignoring income tax, what is the relevant amount for the product-elimination decision?

A)$250,000

B)$75,000

C)$25,000

D)$6,000

83.              Marquette Company currently produces all its product components.  Another firm has offered to supply the casings at $6 each.  Marquette’s total cost per casing is as follows:

The fixed overhead is based on production of 3,000 casings, and none of it would be eliminated if Marquette accepted the offer.  By how much would profit change if Leggier accepts this offer and purchases 3,000 casings?

A)$7,500 increase

B)$9,900 decrease

C)$5,400 increase

D)$300 decrease

84.              Bean Town Company currently produces and sells 12,000 units of its product each month at $15 each.  Another firm has offered to buy an additional 1,000 units at $10 per unit.  Bean Town’s total cost per unit is as follows:

Fixed overhead costs per unit are based on production of 12,000 units per month.  Bean Town currently has the capacity to produce 15,000 units per month.  By how much would profit change if Bean Town accepts this offer?

A)$7,000 increase

B)$5,500 increase

C)$1,700 increase

D)$300 decrease

ESSAYS

85.              Explain the effect on breakeven point of an increase in (a) direct labor cost and (b) factory rent.

86.              Explain the effect on breakeven point of an (a) increase in sales price, (b) a decrease in materials cost, and (c) an increase in insurance cost on the factory.