When a company has a limited resource, it should apply additional capacity of that resource to providing more units of the product or service that has the:
a. highest contribution margin per unit of that limited resource.
b. highest gross proﬁt.
c. highest contribution margin.
d. highest selling price.
XYZ Company manufactures ultra sound equipment. Based on past experience, XYZ has found that total annual repair and maintenance cost can be represented by the following formula: total annual repair and maintenance cost = GH¢ 205,000 + GH¢ 7.50x, where x = machine hours. Last year, XYZ incurred 145,000 machine hours. What was the repair and maintenance cost per machine hour last year?
a. GH¢ 9.95.
b. GH¢ 9.45.
c. GH¢ 8.91.
d. GH¢ 8.00.
Fred’s Company was making a product for GH¢ 60 and selling it for GH¢ 80. A competitor began selling the same product for GH¢ 68. If Fred is to meet the competition's price, and maintain the same amount of profit per unit, what is target cost?
a. GH¢ 40.
b. GH¢ 48.
c. GH¢ 60.
d. GH¢ 63.
Product X has a contribution margin of GH¢ 6.00 per unit, and Product Y has a contribution margin of GH¢ 7.50 per unit. Total fixed costs are GH¢ 300,000. Sales mix and total volume varies from one period to another. Which of the following is true?
a. The ratio of contribution margin to total sales always will be larger for X than for Y.
b. At a sales volume in excess of 25,000 units of X and 25,000 units of Y, operations will be profitable.
c. Variable costs are GH¢ 1.50 more for Y than for X.
d. The ratio of net profit to total sales for Y will be larger than the ratio of net profit to total sales for X.
The distinction between direct and indirect costs is based on whether in relation to the cost object, the cost is
a. Flexible or committed.
b. Avoidable or unavoidable.
c. Identifiable or unidentifiable.
d. Variable or fixed.