Question

25) A company sells two products with information as​ follows:

	A	B
Sales price per unit	$12	$28
Variable cost per unit	$10	$12

The products are machine made. Four units of product A can be made with one machine hour and two units of product B can be made with one machine hour. The company has a maximum of 5,000 machine hours available per month. The company can sell up to 18,000 units of product A per​ month, and up to 3,000 units of product B for the month. What is the optimum product mix to maximize the​ company's operating​ income?

A.

14,000

units of A and

3,000

units of B

B.

28,000

units of A and zero units of B

C.

1,500

units of A and

76,000

units of B

D.zero units of A and

3,000

units of B

26) The phone bill for a corporation consists of both fixed and variable costs. Refer to the four−month data below and apply the high−low method to answer the question.

	Minutes	Total Bill
January	470	$5,000
February	220	$2,685
March	180	$2,645
April	310	$2,810

If the company uses 360 minutes in​ May, how much will the total bill​ be? (Round any intermediate calculations to the nearest cent and your final answer to the nearest​ dollar.)

A.

$1,184

B.

$8,817

C.

$2,923

D.

Answer 1

25.

	A	B
Selling price per unit (i)	12	28
Variable cost per unit (ii)	10	12
Contribution margin (iii) = (i)- (ii)	$2	$16
Machine hour per unit (iv)	1/4	1/2
Contribution margin per machine hour (iii)/(iv)	$8	$32

Since Contribution margin per machine hour for product B, hence from the available machine hours, first of product B should be made and from remaining machine hours, product A should be made.

Maximum output of product B = 3,000 units

Machine hour per unit of product B = 1/2

Machine hours used in producing product B = Maximum output of product B x Machine hour per unit of product B

= 3,000 x 1/2

= 1,500

Total machine hours available = 5,000

Remaining machine hours = Total machine hours available- Machine hours used in producing product B

= 5,000-1,500

= 3,500

Machine hour per unit of product A = 1/4

= 0.25

Maximum production of product A = Remaining machine hours x Machine hour per unit of product A

= 3,500 x 0.25

= 14,000 units

optimum product mix to maximize the​ company's operating​ income 14,000 units of A and 3,000 units of B.

Correct option is A.

26.

Variable cost per minute= (Highest activity cost - Lowest activity cost)/(Highest activity - Lowest activity)

= (5,000-2,645)/(470-180)

= 2,355/290

= 8.12 per minute

Fixed cost = Highest activity cost - Highest activity x Variable cost per minute

= 5,000- 470 x 8.12

= 5,000-3,816

= $1,184

If the company uses 360 minutes in​ May, total bill will be = Fixed cost + Variable cost per minute x Minutes used

= 1,184+ 8.12 x 360

= 1,184+2,923

= $4,107

Correct option is D.