Question

Q1:

Starling Co. is considering disposing of a machine with a book value of $23,900 and estimated remaining life of five years. The old machine can be sold for $5,800. A new high-speed machine can be purchased at a cost of 73,200. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $23,200 to $20,500 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is

increase of $53,900

decrease of $70,070

increase of $70,070

decrease of $53,900

Q2:

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour.

Which product has the highest contribution margin per machine hour?

a.Bales

b.Tales

c.Wales

d.Bales and Tales have the same

Q3:

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour.

What is the contribution margin per machine hour for Bales?

a.$7

b.$5

c.$35

d.$28

Q4:

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour.

What is the contribution margin per machine hour for Tales?

a.$7

b.$35

c.$4

d.$28

Q5:

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour.

What is the contribution per machine hour for Wales?

a.$17

b.$35

c.$28

d.$7

Q6:

Crane Company Division B recorded sales of $71,900, variable cost of goods sold of $50,300, variable selling expenses of $19,500, and fixed costs of $12,600, creating a loss from operations of $10,500.

Determine the differential income or loss from the sales of Division B. Enter a loss as a negative number.
$  

Should this Division B be discontinued? (If the answer to above part is negative, select "Yes".)

(YES OR NO?)

Answer 1

Q1,

Ans:        

Decrease of Income $53900

Calculation:

Cost of new asset    (73200)

Savings in cost        13500

Sale of Old Machine 5800

Total                         (53900)

Note: Annual cost Saving cost= 23200-20500=2700 per year *5 years=13500/-

Q2.

Ans:c.wales

Particulars       Bales   Tales   Wales

Selling Price                          55                          78           32

Less: Variable cost              (20)                       ( 50)          ( 15)

Contribution Margin            35                           28           17

No of required hours per unit 5                       7              1

Contribution margin per hour 7                        4              17

Ranking                                 2                            3              1

Highest Contribution Margin       wales=17 per hour

Based on the question 2,

Q3: the contribution margin per machine hour for Bales?

Ans:7$

Q4: the contribution margin per machine hour for tales?

Ans:$4

Q5: the contribution margin per machine hour for wales?

Ans:$17

Q6:

ANS;

Statement Showing Income or Loss of Division B

Particulars                                             Amount($)

Sales 71900

Less:Variable cost of sales                (50300)

Less:Variable selling expense             (19500)

Contribution                                         2100

Less:Fixed cost (12600)

Loss (10500)

The Balance is negative so It is advisable to close the Business of Crane Company Divison B