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In: Accounting

23. Thanos company's total production capacity is 4,500 units per month. Currently, the company plans to...

23.

Thanos company's total production capacity is 4,500 units per month. Currently, the company plans to make and sell 4,000 units per month for the next 12 months. The company's sales manager, Mr. C, received an offer from a new customer to purchase 465 units at $96 per unit for the next five months. He is reluctant to accept this offer, because the normal selling price is $105. Also, the company's absorption costing system shows that manufacturing costs are $80 per unit, and selling costs are $16 per unit. The sales manager is concerned that the low offer price will not help the company cover its high manufacturing fixed costs.

(Q.) Should the company accept the offer?

(A.)

Yes, because operating income will most likely increase.
No, because the company will only break even on this offer.
Yes, because excess capacity will decrease.
No, because the company's ROI will most likely decrease.
All of the other answers are incorrect.

24.

Naomi company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations, using super-variable costing.

Variable cost per unit:
Direct materials	$10
Fixed costs per year:
Direct labor	$113,400
Fixed manufacturing overhead	$94,500
Fixed selling and administrative expenses	$254,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. The selling price of the company’s product is $150 per unit.

	Year 1	Year 2
Production (units)	6,300	6,300
Sale (units)	5,900	6,700

For external reporting purpose, the company has to use GAAP-consistent absorption accounting.

(Q.) The absorption costing income for Year 1 is:

(A.) $ ?

25. Eugene has 2 branches--Northern and Southern branches.

The company's fixed costs that are traceable to the Northern branch is $180,000, while fixed costs that are traceable to the Southern branch is $175,000. The Northern branch is further divided into two segments based on the customer types: the local and the nonlocal. Traceable fixed cost for the local is $62,850, and traceable fixed cost for the nonlocal is $70,000.

(Q.) How much is the common fixed costs of the two order types for the Northern branch?

(A.) $ ?

Expert Solution

ekkarill92 answered 2 years ago

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