70) Nance Corporation is about to introduce a new product. The following costs would be
incurred if 40,000 units are produced and sold each year:
Per Unit
Total
Variable production costs
$
10
400,000
Fixed production costs
$
5
200,000
Variable selling and administrative costs
$
2
80,000
Fixed selling and administrative costs
$
3
$
120,000
–
Nance Corporation uses the absorption costing approach to cost-plus pricing as described in the
text.
After introducing the product, the company finds that it has excess capacity. A foreign dealer has
offered to purchase 5,000 units of the product at a special price of $21 per unit. This sale would
not disturb regular business. If the special price is accepted on the 5,000 units, the effect on total
net income for the year should be:
A) $45,000 increase
B) $30,000 increase
C) $5,000 increase
D) $26,250 decrease
Per Unit
Variable production costs
$
10
Variable selling and administrative costs
2
Variable cost per unit
$
12
Incremental sales ($21 per unit × 5,000 units)
$
105,000
Incremental cost ($12 × 5,000 units)
60,000
Incremental net income
$
45,000
71) The management of Musselman Corporation would like to set the selling price on a new
product using the absorption costing approach to cost-plus pricing. The company’s accounting
department has supplied the following estimates for the new product:
Per Unit
Per Year
Direct materials
$
27
Direct labor
$
16
Variable manufacturing overhead
$
8
Fixed annual manufacturing overhead
$
216,000
Variable selling and administrative expenses
$
3
Fixed annual selling and administrative expenses
$
72,000
Management plans to produce and sell 9,000 units of the new product annually. The new product
would require an investment of $1,305,000 and has a required return on investment of 10%.
The absorption costing unit product cost is:
A) $51
B) $54
C) $75
D) $86
72) The management of Musselman Corporation would like to set the selling price on a new
product using the absorption costing approach to cost-plus pricing. The company’s accounting
department has supplied the following estimates for the new product:
Per Unit
Per Year
Direct materials
$
27
Direct labor
$
16
Variable manufacturing overhead
$
8
Fixed annual manufacturing overhead
$
216,000
Variable selling and administrative expenses
$
3
Fixed annual selling and administrative expenses
$
72,000
Management plans to produce and sell 9,000 units of the new product annually. The new product
would require an investment of $1,305,000 and has a required return on investment of 10%.
The markup percentage on absorption cost is closest to:
A) 25%
B) 34%
C) 15%
D) 10%
73) The management of Musselman Corporation would like to set the selling price on a new
product using the absorption costing approach to cost-plus pricing. The company’s accounting
department has supplied the following estimates for the new product:
Per Unit
Per Year
Direct materials
$
27
Direct labor
$
16
Variable manufacturing overhead
$
8
Fixed annual manufacturing overhead
$
216,000
Variable selling and administrative expenses
$
3
Fixed annual selling and administrative expenses
$
72,000
Management plans to produce and sell 9,000 units of the new product annually. The new product
would require an investment of $1,305,000 and has a required return on investment of 10%.
The unit target selling price using the absorption costing approach is closest to:
A) $115.00
B) $86.50
C) $100.50
D) $83.33
74) Mercer Corporation estimates that an investment of $650,000 would be necessary to produce
and sell 60,000 units of a new product each year. Other costs associated with the new product
would be:
Variable costs (per unit):
Materials, labor, and overhead $12
Selling and administrative $3
Fixed costs per year:
Manufacturing overhead $360,000
Selling and administrative $300,000
The company requires a 25% return on the investment in all products. The company uses the
absorption costing approach costing to pricing as described in the text.
The markup percentage on the new product would be closest to:
A) 51.0%
B) 12.5%
C) 24.0%
D) 59.5%
75) Mercer Corporation estimates that an investment of $650,000 would be necessary to produce
and sell 60,000 units of a new product each year. Other costs associated with the new product
would be:
Variable costs (per unit):
Materials, labor, and overhead $12
Selling and administrative $3
Fixed costs per year:
Manufacturing overhead $360,000
Selling and administrative $300,000
The company requires a 25% return on the investment in all products. The company uses the
absorption costing approach costing to pricing as described in the text.
The selling price would be closest to:
A) $28.71
B) $26.50
C) $22.00
D) $32.67
76) Ecob Corporation uses the absorption costing approach to cost-plus pricing as described in
the text to set prices for its products. Based on budgeted sales of 19,000 units next year, the unit
product cost of a particular product is $16.00. The company’s selling and administrative expenses
for this product are budgeted to be $250,800 in total for the year. The company has invested
$440,000 in this product and expects a return on investment of 14%.
The markup on absorption cost for this product would be closest to:
A) 96.5%
B) 102.8%
C) 14.0%
D) 82.5%
77) Ecob Corporation uses the absorption costing approach to cost-plus pricing as described in
the text to set prices for its products. Based on budgeted sales of 19,000 units next year, the unit
product cost of a particular product is $16.00. The company’s selling and administrative expenses
for this product are budgeted to be $250,800 in total for the year. The company has invested
$440,000 in this product and expects a return on investment of 14%.
The selling price based on the absorption costing approach for this product would be closest to:
A) $59.21
B) $29.20
C) $32.44
D) $18.24
78) Spach Corporation manufactures numerous products, one of which is called Beta68. The
company has provided the following data about this product:
Unit sales (a)
110,000
Selling price per unit
$
16.00
Variable cost per unit
10.00
Contribution margin per unit (b)
$
6.00
Total contribution margin (a) × (b)
$
660,000
Traceable fixed expense
580,000
Net operating income
$
80,000
–
Management is considering decreasing the price of Beta68 by 5%, from$16.00 to $15.20. The
company’s marketing managers estimate that this price reduction would increase unit sales by
10%, from 110,000 units to 121,000 units. Assuming that the total traceable fixed expense does
not change, what net operating income will product Beta68 earn at a price of $15.20 if this sales
forecast is correct?
A) $629,200
B) $572,000
C) ($8,000)
D) $49,200
79) Spach Corporation manufactures numerous products, one of which is called Beta-68. The
company has provided the following data about this product:
Unit sales (a)
110,000
Selling price per unit
$
16.00
Variable cost per unit
10.00
Contribution margin per unit (b)
$
6.00
Total contribution margin (a) × (b)
$
660,000
Traceable fixed expense
580,000
Net operating income
$
80,000
–
Assume that the total traceable fixed expense does not change. How many units of product Beta–
68 would Spach need to sell at a price of $15.20 to earn the same net operating income that it
currently earns at a price of $16.00? (Round your answer up to the nearest whole number.)
A) 126,924
B) 111,538
C) 96,667
D) 121,000
80) Weitman Corporation manufactures numerous products, one of which is called Epsilon50.
The company has provided the following data about this product:
Unit sales (a)
130,000
Selling price per unit
$
29.00
Variable cost per unit
$
18.00
Traceable fixed expense
$
1,280,000
–
What is the net operating income for product Epsilon50 at the current price?
A) $1,430,000
B) $150,000
C) $3,770,000
D) $2,490,000
Unit sales (a)
130,000
Selling price per unit
$
29.00
Variable cost per unit
18.00
Contribution margin per unit (b)
$
11.00
Total contribution margin (a) × (b)
$
1,430,000
Net operating income
$
150,000
–
81) Weitman Corporation manufactures numerous products, one of which is called Epsilon-50.
The company has provided the following data about this product:
Unit sales (a)
130,000
Selling price per unit
$
29.00
Variable cost per unit
$
18.00
Traceable fixed expense
$
1,280,000
–
Management is considering increasing the price of Epsilon-50 by 9%, from$29.00 to $31.61. The
company’s marketing managers estimate that this price hike would decrease unit sales by 15%,
from 130,000 units to 110,500 units. Assuming that the total traceable fixed expense does not
change, what net operating income will product Epsilon 50 earn at a price of $31.61 if this sales
forecast is correct?
A) $223,905
B) $1,769,300
C) $489,300
D) $1,503,905
82) Weitman Corporation manufactures numerous products, one of which is called Epsilon-50.
The company has provided the following data about this product:
Unit sales (a)
130,000
Selling price per unit
$
29.00
Variable cost per unit
$
18.00
Traceable fixed expense
$
1,280,000
–
Assume that the total traceable fixed expense does not change. How many units of product
Epsilon-50 would Weitman need to sell at a price of $31.61 to earn the same net operating
income that it currently earns at a price of $29.00? (Round your answer up to the nearest whole
number.)
A) 105,070
B) 116,364
C) 110,500
D) 94,048
83) Boggess Corporation manufactures numerous products, one of which is called Alpha41. The
company has provided the following data about this product:
Unit sales (a)
120,000
Selling price per unit
$
86.00
Variable cost per unit
57.00
Contribution margin per unit (b)
$
29.00
Total contribution margin (a) × (b)
$
3,480,000
Traceable fixed expense
3,150,000
Net operating income
$
330,000
–
Management is considering increasing the price of Alpha41 by 10%, from $86.00 to $94.60. The
company’s marketing managers estimate that this price hike would decrease unit sales by 20%,
from 120,000 units to 96,000 units. Assuming that the total traceable fixed expense does not
change, what net operating income will product Alpha41 earn at a price of $94.60 if this sales
forecast is correct?
A) $459,600
B) $4,512,000
C) $3,609,600
D) $1,362,00
84) Boggess Corporation manufactures numerous products, one of which is called Alpha-41. The
company has provided the following data about this product:
Unit sales (a)
120,000
Selling price per unit
$
86.00
Variable cost per unit
57.00
Contribution margin per unit (b)
$
29.00
Total contribution margin (a) × (b)
$
3,480,000
Traceable fixed expense
3,150,000
Net operating income
$
330,000
–
Assume that the total traceable fixed expense does not change. How many units of product
Alpha-41 would Boggess need to sell at a price of $94.60 to earn the same net operating income
that it currently earns at a price of $86.00? (Round your answer up to the nearest whole number.)
A) 96,000
B) 92,554
C) 83,777
D) 108,621
85) Twisdale Corporation manufactures numerous products, one of which is called Omicron52.
The company has provided the following data about this product:
Unit sales (a)
160,000
Selling price per unit
$
42.00
Variable cost per unit
$
27.00
Traceable fixed expense
$
2,070,000
–
What is the net operating income for product Omicron52 at the current price?
A) $6,720,000
B) $4,650,000
C) $330,000
D) $2,400,000
Unit sales (a)
160,000
Selling price per unit
$
42.00
Variable cost per unit
27.00
Contribution margin per unit (b)
$
15.00
Traceable fixed expense
2,070,000
Net operating income
$
330,000
–
86) Twisdale Corporation manufactures numerous products, one of which is called Omicron-52.
The company has provided the following data about this product:
Unit sales (a)
160,000
Selling price per unit
$
42.00
Variable cost per unit
$
27.00
Traceable fixed expense
$
2,070,000
–
Management is considering decreasing the price of Omicron-52 by 4%, from $42.00 to $40.32.
The company’s marketing managers estimate that this price reduction would increase unit sales
by 5%, from 160,000 units to 168,000 units. Assuming that the total traceable fixed expense does
not change, what net operating income will product Omicron 52 earn at a price of $40.32 if this
sales forecast is correct?
A) $2,131,200
B) $61,200
C) $167,760
D) $2,237,760
87) Twisdale Corporation manufactures numerous products, one of which is called Omicron-52.
The company has provided the following data about this product:
Unit sales (a)
160,000
Selling price per unit
$
42.00
Variable cost per unit
$
27.00
Traceable fixed expense
$
2,070,000
–
Assume that the total traceable fixed expense does not change. How many units of product
Omicron-52 would Twisdale need to sell at a price of $40.32 to earn the same net operating
income that it currently earns at a price of $42.00? (Round your answer up to the nearest whole
number.)
A) 138,000
B) 155,405
C) 180,181
D) 168,000
88) Kinsley Corporation manufactures numerous products, one of which is called Kappa03. The
company has provided the following data about this product:
Unit sales (a)
50,000
Selling price per unit
$
36.00
Variable cost per unit
$
26.00
Traceable fixed expense
$
470,000
–
What is the net operating income for product Kappa03 at the current price?
A) $500,000
B) $1,330,000
C) $1,800,000
D) $30,000
Unit sales (a)
Selling price per unit
$
Variable cost per unit
Contribution margin per unit (b)
$
Traceable fixed expense
Net operating income
$
–
89) Kinsley Corporation manufactures numerous products, one of which is called Kappa-03. The
company has provided the following data about this product:
Unit sales (a)
50,000
Selling price per unit
$
36.00
Variable cost per unit
$
26.00
Traceable fixed expense
$
470,000
–
Management is considering increasing the price of Kappa-03 by 7%, from $36.00 to $38.52. The
company’s marketing managers estimate that this price hike would decrease unit sales by 10%,
from 50,000 units to 45,000 units. Assuming that the total traceable fixed expense does not
change, what net operating income will product Kappa-03 earn at a price of $38.52 if this sales
forecast is correct?
A) $626,000
B) $563,400
C) $156,000
D) $93,400