Question :
21. Henderson Manufacturing Inc. manufactures electric scooters. The company currently makes : 1295616
21. Henderson Manufacturing Inc. manufactures electric scooters. The company currently makes all of the electronic components for the scooter itself. When 6,000 motors are manufactured each year, the motor costs per unit are as follows:
Direct materials
$3
Direct labor
4
Variable overhead
5
Fixed overhead
8
Plymouth Inc. has offered to sell Henderson 6,000 motors for $15 per unit. If Henderson accepts the offer, 60% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Henderson Manufacturing Inc. information above. What are the relevant costs per unit of Henderson manufacturing the motors themselves? A. $16.80B. $15.20C. $20.00D. $12.00
22. Henderson Manufacturing Inc. manufactures electric scooters. The company currently makes all of the electronic components for the scooter itself. When 6,000 motors are manufactured each year, the motor costs per unit are as follows:
Direct materials
$3
Direct labor
4
Variable overhead
5
Fixed overhead
8
Plymouth Inc. has offered to sell Henderson 6,000 motors for $15 per unit. If Henderson accepts the offer, 60% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Henderson Manufacturing Inc. information above. If Henderson accepts the offer to purchase 6,000 motors from Plymouth, net income will: A. decrease by $1,200.B. increase by $30,000.C. decrease by $18,000.D. increase by $10,800.
23. Compton Products Inc. manufactures humidifiers. The company currently makes all of the electronic components for the humidifier itself. When 10,000 units are manufactured each year, the motor costs per unit are as follows:
Direct materials
$6
Direct labor
8
Variable overhead
7
Fixed overhead
9
McClintock Inc. has offered to sell Compton 10,000 motors for $25 per unit. If Compton accepts the offer, 75% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Compton Products Inc. information above. What are the relevant costs per unit of Compton making the motors themselves? A. $21.00B. $23.25C. $27.75D. $30.00
24. Compton Products Inc. manufactures humidifiers. The company currently makes all of the electronic components for the humidifier itself. When 10,000 units are manufactured each year, the motor costs per unit are as follows:
Direct materials
$6
Direct labor
8
Variable overhead
7
Fixed overhead
9
McClintock Inc. has offered to sell Compton 10,000 motors for $25 per unit. If Compton accepts the offer, 75% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Compton Products Inc. information above. If Compton accepts the offer to purchase 10,000 motors from McClintock, net income will: A. increase by $27,500.B. decrease by $17,500.C. increase by $50,000.D. decrease by $40,000.
25. In the decision on whether or not to drop an unprofitable product line, the product line will most likely be dropped if: A. all of the product line’s fixed costs are unavoidable.B. the product line’s total fixed costs are less than the contribution margin lost from dropping the product line.C. the contribution margin lost from dropping the product line is less than the fixed costs avoided from dropping the product line.D. the contribution margin lost from dropping the product line is more than the fixed costs avoided from dropping the product line.
26. A particular product line is most likely to be dropped when: A. its total fixed costs are more than its contribution margin.B. its avoidable fixed costs are more than its contribution margin.C. its unavoidable fixed costs are more than its contribution margin.D. its variable costs are more than its fixed costs.
27. Laurel Inc. has three product lines: A, B, and C.
A
B
C
Total
Sales
$ 20,000
$ 35,000
$ 22,000
$ 77,000
Variable costs
8,000
10,000
14,000
32,000
Contribution margin
12,000
25,000
8,000
45,000
Fixed costs
4,000
11,000
9,000
24,000
Net income
$ 8,000
$ 14,000
$ (1,000)
$ 21,000
Management is considering dropping product line C. If it is discontinued, one-half of its fixed costs can be avoided. The discontinuation of product line C would: A. decrease net income by $3,500.B. increase net income by $1,000.C. decrease net income by $12,500.D. increase net income by $4,500.
28. Tremaine Inc. has three product lines: A, B, and C.
A
B
C
Total
Sales
$ 50,000
$ 85,000
$ 90,000
$ 225,000
Variable costs
30,000
30,000
44,000
104,000
Contribution margin
20,000
55,000
46,000
121,000
Fixed costs
23,000
25,000
18,000
66,000
Net income
$(3,000)
$ 30,000
$ 28,000
$ 55,000
Management is considering dropping product line A. If it is discontinued, $18,000 of its fixed costs can be avoided. The discontinuation of product line A would: A. decrease net income by $15,000.B. increase net income by $21,000.C. decrease net income by $2,000.D. increase net income by $3,000.
29. Carlton Products has three product lines: A, B, and C.
A
B
C
Total
Sales
$ 500,000
$ 550,000
$ 700,000
$ 1,750,000
Variable costs
280,000
420,000
300,000
1,000,000
Contribution margin
220,000
130,000
400,000
750,000
Fixed costs
100,000
140,000
150,000
390,000
Net income
$120,000
$(10,000)
$ 250,000
$ 360,000
Management is considering dropping product line B. If it is discontinued, all of its fixed costs can be avoided. The discontinuation of product line B would: A. decrease net income $10,000.B. increase net income $140,000.C. decrease net income $130,000.D. increase net income $10,000.
30. Paxton Products has three product lines: A, B, and C.
A
B
C
Total
Sales
$ 90,000
$ 150,000
$ 200,000
$ 440,000
Variable costs
50,000
120,000
100,000
270,000
Contribution margin
40,000
30,000
100,000
170,000
Fixed costs
15,000
40,000
50,000
105,000
Net income
$ 25,000
$(10,000)
$ 50,000
$ 65,000
Management is considering dropping product line B. In order for the dropping of product line B to not cause an overall decrease in profits, product line B’s avoidable fixed costs should be at least: A. $40,000B. $30,000C. $10,000D. $70,000
