101) Logan Company can sell all of the standard and premier products they can produce, but it
has limited production capacity. It can produce 6 standard units per hour or 4 premier units per
hour, and it has 36,000 production hours available. Contribution margin per unit is $24 for the
standard product and $30 for the premier product. What is the total contribution margin if Logan
chooses the most profitable sales mix?
A) $7,280,000.
B) $8,800,000.
C) $4,960,000.
D) $5,184,000.
E) $6,704,000.
102) Bricktan Inc. makes three products, basic, classic, and deluxe. The maximum Bricktan can
sell is 715,000 units of basic, 420,000 units of classic, and 120,000 units of deluxe. Bricktan has
limited production capacity of 90,000 hours. It can produce 10 units of basic, 8 units of classic,
and 4 units of deluxe per hour. Contribution margin per unit is $15 for the basic, $25 for the
classic, and $55 for the deluxe. What is the most profitable sales mix for Bricktan Inc.?
A) 71,500 basic, 420,000 classic and 240,000 deluxe.
B) 150,000 basic, 120,000 classic and 240,000 deluxe.
C) 300,000 basic, 240,000 classic and 120,000 deluxe.
D) 600,000 basic, 0 classic and 120,000 deluxe.
E) 75,000 basic, 420,000 classic and 120,000 deluxe.
103) Bricktan Inc. makes three products, basic, classic, and deluxe. The maximum Bricktan can
sell is 75,000 units of basic, 420,000 units of classic, and 120,000 units of deluxe. Bricktan has
limited production capacity of 90,000 hours. It can produce 10 units of basic, 8 units of classic,
and 4 units of deluxe per hour. Contribution margin per unit is $15 for the basic, $25 for the
classic, and $55 for the deluxe. What is the total contribution margin if Bricktan chooses the
most profitable sales mix?
A) $8,000,000.
B) $9,700,000.
C) $15,500,000.
D) $18,225,000.
E) $12,800,000.
104) Rosie’s Company has three products, P1, P2, and P3. The maximum Rosie’s can sell is
65,000 units of P1, 24,000 units of P2, and 12,000 units of P3. Rosie’s has limited production
capacity of 9,000 hours. It can produce 12 units of P1, 6 units of P2, and 3 units of P3 per hour.
Contribution margin per unit is $5 for the P1, $15 for the P2, and $25 for the P3. What is the
most profitable sales mix for Rosie’s Company?
A) 12,000 P1, 24,000 P2, 12,000 P3.
B) 10,800 P1, 24,000 P2, 12,000 P3.
C) 12,000 P1, 20,000 P2, 1,200 P3.
D) 16,800 P1, 20,000 P2, 12,000 P3.
E) 10,800 P1, 25,000 P2, 10,800 P3.
105) JK Company can sell all of the plush and supreme products it can produce, but it has
limited production capacity. It can produce 4 plush units per hour or 2 supreme units per hour,
and it has 2,000 production hours available. Contribution margin per unit is $214 for the plush
product and $300 for the supreme product. What is the most profitable sales mix for JK
Company?
A) 0 plush units and 4,000 supreme units.
B) 4,000 plush units and 4,000 supreme units.
C) 8,000 plush units and 0 supreme units.
D) 8,000 plush units and 4,000 supreme units.
E) 4,000 plush units and 2,000 supreme units.
106) JK Company can sell all of the plush and supreme products it can produce, but it has
limited production capacity. It can produce 4 plush units per hour or 2 supreme units per hour,
and it has 2,000 production hours available. Contribution margin per unit is $214 for the plush
product and $300 for the supreme product. What is the total contribution margin if JK chooses
the most profitable sales mix?
A) $824,000.
B) $1,424,000.
C) $1,648,000.
D) $1,712,000.
E) $2,400,000.
107) Valdez Company is considering eliminating its kitchen division, which reported an
operating loss of $53,000 for the past year. Kitchen division sales for the year were $1,040,000,
and its variable costs were $775,000. The fixed costs of the division were $318,000. If the
kitchen division is dropped, 60% of the fixed costs allocated to it could be eliminated. The
impact on Valdez’s operating income from eliminating this business segment would be:
A) $74,200 decrease
B) $265,000 increase
C) $274,200 decrease
D) $74,200 increase
E) $265,000 decrease
108) Valber Company is considering eliminating its phone division. The company allocates fixed
costs based on sales. If the phone division is dropped, $150,000 of the fixed costs allocated to
that division could be eliminated. The impact on Valber’s operating income from eliminating the
phone division would be:
Desktops
Laptops
Tablets
Phones
Sales
$
356,000
$
871,500
$
694,000
$
975,000
Variable costs
201,000
635,000
528,000
795,000
Contribution
margin
155,000
236,500
166,000
180,000
Fixed costs
71,200
174,300
138,800
195,000
Net income
(loss)
83,800
62,200
27,200
(15,000
)
A) $30,000 increase
B) $150,000 increase
C) $150,000 decrease
D) $15,000 increase
E) $30,000 decrease
Revenues lost
$
(975,000
)
Variable costs avoided
795,000
Fixed costs eliminated
150,000
Impact on operating income
$
(30,000
)
109) Carns Company is considering eliminating its small tools division, which reported an
operating loss for the recent year of $85,000. Division sales for the year were $1,310,000 and its
variable costs were $1,175,000. The fixed costs of the division were $220,000. If the kitchen
division is dropped, 45% of the fixed costs allocated it could be eliminated. The impact on
Carns’s operating income from eliminating the small tools division would be:
A) $74,200 decrease
B) $36,000 decrease
C) $220,000 decrease
D) $36,000 increase
E) $99,000 decrease
110) Gion Company is considering eliminating its windows division, which reported an
operating loss for the recent year of $105,000. Division sales for the year were $1,110,000 and
its variable costs were $975,000. The fixed costs of the division were $220,000. If the windows
division is dropped, 65% of the fixed costs allocated to it could be eliminated. The impact on
Gion’s operating income from eliminating this business segment would be:
A) $7,200 decrease
B) $8,000 increase
C) $143,000 decrease
D) $143,000 increase
E) $8,000 decrease
111) Sammy Company is considering eliminating its commercial division. The company
allocates fixed costs based on division sales. If the commercial division is dropped, $100,000 of
the fixed costs allocated to it could be eliminated. The impact on Sammy’s operating income
from eliminating the commercial division would be:
Garden
Farm
Commercial
Sales
$
678,000
$
920,000
$
692,000
Variable costs
372,900
414,000
649,800
Contribution margin
305,100
506,000
42,200
Fixed costs
247,200
335,500
252,400
Net income (loss)
57,900
170,500
(210,200
)
A) $10,200 decrease
B) $45,000 increase
C) $57,800 increase
D) $15,000 increase
E) $57,800 decrease
Revenues lost
$
(692,000
)
Variable costs avoided
649,800
Fixed costs eliminated
100,000
Increase in operating income
$
57,800
112) Pinkin Inc. needs to determine a price for a new phone model. Pinkin desires a 25% markup
on the total cost of the phone. Pinkin expects to sell 30,000 phones. Additional information is as
follows:
Variable product cost per unit
$
75
Variable administrative cost per unit
50
Total fixed overhead
85,000
Total fixed administrative
65,000
Using the total cost method what price should Pinkin charge?
A) $156.10
B) $162.50
C) $130.10
D) $142.50
E) $161.25
113) Galla Inc. needs to determine a price for a new product. Galla desires a 25% markup on the
total cost of the product. Galla expects to sell 5,000 units. Additional information is as follows:
Variable product cost per unit
$
15
Variable administrative cost per unit
10
Total fixed overhead
45,000
Total fixed administrative
18,000
Using the total cost method what price should Galla charge?
A) $56
B) $47
C) $62
D) $30
E) $42
114) Galla Inc. operates in a highly competitive market where the market price for its product is
$170 per unit. Galla desires a $15 profit per unit. Galla expects to sell 5,000 units. Additional
information is as follows:
Variable product cost per unit
$
15
Variable administrative cost per unit
10
Total fixed overhead
45,000
Total fixed administrative
18,000
Using target costing, what is the target cost?
A) $135.00
B) $160.00
C) $130.00
D) $145.00
E) $155.00
115) Jaybird Company operates in a highly competitive market where the market price for its
product is $50 per unit. Jaybird desires a $15 profit per unit. Jaybird expects to sell 5,000 units.
Additional information is as follows:
Variable product cost per unit
$
15
Variable administrative cost per unit
10
Total fixed overhead
45,000
Total fixed administrative
18,000
To achieve the target cost per unit, Jaybird must reduce total expenses by how much?
A) $14,500
B) $3,500
C) $23,000
D) $20,000
E) $13,000
116) Pauley Company needs to determine a markup for a new product. Pauley expects to sell
15,000 units and wants a target profit of $22 per unit. Additional information is as follows:
Variable product cost per unit
$
19
Variable administrative cost per unit
11
Total fixed overhead
13,500
Total fixed administrative
21,000
Using the variable cost method, what markup percentage to variable cost should be used?
A) 71%
B) 76%
C) 92%
D) 81%
E) 80%
117) Hordel Company needs to determine a markup for a new product. Hordel expects to sell
5,000 units and wants a target profit of $82 per unit. Additional information is as follows:
Variable product cost per unit
$
79
Variable administrative cost per unit
21
Total fixed overhead
42,000
Total fixed administrative
31,000
Using the variable cost method, what markup percentage to variable cost should be used?
A) 80.1%
B) 98.20%
C) 94.1%
D) 91.7%
E) 96.6%
118) Yelk Garage uses time and materials pricing. It is setting prices for next year using the
following information:
Labor rate, including fringe benefits
50
per hour
Annual labor hours
3,350
hours
Annual materials purchases
825,000
Materials purchasing, handling, and storage
46,000
Overhead for depreciation, taxes, insurance, etc.
67,000
Target profit margin for both labor and materials
20
%
What should Yelk set as the direct labor rate per hour?
A) $70 per hour.
B) $50 per hour.
C) $64 per hour.
D) $100 per hour.
E) $84 per hour.
119) Yelk Garage uses time and materials pricing. It is setting prices for next year using the
following information:
Labor rate, including fringe benefits
50
per hour
Annual labor hours
3,350
hours
Annual materials purchases
825,000
Materials purchasing, handling, and storage
41,250
Overhead for depreciation, taxes, insurance, etc.
67,000
Target profit margin for both labor and materials
20
%
What should Yelk set as the materials markup per dollar of materials used?
A) 25%.
B) 5%.
C) 20%.
D) 35%.
E) 30%.
120) Carly’s Clips charges for their grooming services based on the following:
Direct labor rate
$
60
per hour
Materials markup
30
%
Using time and materials pricing, what is the total price for a job requiring 3 direct labor hours
and $50 of materials?
A) $195.
B) $230.
C) $245.
D) $180.
E) $250.