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147.
Brothers Corp. is considering dropping its talking dog product line due to continuing
losses.
Revenue and cost data for the talking dog line for the past year follow:
Sales (20,000 units)
$300,000
Variable costs
180,000
Contribution margin
120,000
Fixed costs
140,000
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148.
Price Candies (PC) makes three types of chocolate candy bars. The head of marketing,
Nathan Lord found the chart below and believes PC should drop the Almond line. He asks
controller Faye Martin to review the situation and determine the fate of the Almond Line.
Solid
Chocolate
Almond
Chocolate
Sales
$300,000
$400,000
Unit Costs
($100,000)
($250,000)
Facility &
Product Costs
($150,000)
($200,000)
Segment
Income
$50,000
($50,000)
Unit Costs
($500,000)
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149.
Mr. Morgan Henry, accountant for Black & Logan Co. Inc., has prepared the following
product-line income data:
Product
Total
A
B
C
Sales
$100,000
$50,000
$20,000
$30,000
Variable
expenses
60,000
30,000
10,000
20,000
Contribution
margin
40,000
20,000
10,000
10,000
Fixed expenses:
Rent
5,000
2,500
1,000
1,500
Depreciation
6,000
3,000
1,200
1,800
Utilities
4,000
2,000
500
1,500
Supervisor’s
salary
5,000
1,500
500
3,000
Maintenance
3,000
1,500
600
900
Administrative
expenses
10,000
3,000
2,000
5,000
Total fixed
expenses
33,000
13,500
5,800
13,700
Net operating
income (loss)
$7,000
$6,500
$4,200
($3,700)
The following additional information is available:
* The factory rent of $1,500 assigned to Product C is avoidable if the product were
dropped.
* The company’s total depreciation would not be affected by dropping C.
* Eliminating Product C will reduce the monthly utility bill from $1,500 to $800.
* The supervisor’s salary is avoidable.
* If Product C is discontinued, the maintenance department will be able to reduce monthly
expenses from $3,000 to $2,000.
* Elimination of Product C will make it possible to cut two persons from the administrative
staff; their combined salaries total $3,000.
Required:
Prepare an analysis showing whether Product C should be eliminated.
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150.
Barry Inc. makes a range of products. The company’s predetermined overhead rate is $14
per direct labor-hour, which was calculated using the following budgeted data:
Variable manufacturing overhead
$100,000
Fixed manufacturing overhead
$250,000
Direct labor-hours
25,000
Component ZZ9 is used in one of the company’s products. The unit cost of the component
according to the company’s cost accounting system is determined as follows:
Direct materials
$28.00
Direct labor
56.00
Manufacturing overhead applied
39.20
Unit product cost
$123.20
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151.
Muzik Corporation uses part X43 in one of its products. The company’s Accounting
Department reports the following costs of producing the 16,000 units of the part that are
needed every year.
Per Unit
Direct materials
$2.90
Direct labor
$3.90
Variable overhead
$6.70
Supervisor’s salary
$7.20
Depreciation of special equipment
$8.30
Allocated general overhead
$5.40
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152.
Ralston Company makes 10,000 units per year of a part it uses in the products it
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manufactures. The unit product cost of this part is computed as follows:
Direct materials
$13.20
Direct labor
20.80
Variable manufacturing overhead
3.00
Fixed manufacturing overhead
10.90
Unit product cost
$47.90
Direct materials
$13.20