Marsden manufactures a cat food product called Special Export. Marsden currently

Question

Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag are $2.30 and total fixed costs are $10,000. The cat food can be sold as it is for $9.55 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,500 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,500 bags of Feline Surprise, which can be sold for $8.55 and $6.55 per bag, respectively. If Special Export is processed further into Prime Cat Food and Feline Surprise, the total gross profit would be:

    

Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year:

         

      

The White Division occupies 24,000 square feet in the plant. The Grey Division occupies 34,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $54,000. Compute gross profit for the White and Grey Divisions, respectively.

  $82,925.   $110,925.   $72,925.   $105,925.   $108,425.

Explanation / Answer

If Special Export is processed further into Prime Cat Food and Feline Surprise, the total gross profit would be:

= (10,000 bags of Prime Cat Food x $8.55 + 3,500 bags of Feline Surprise x 6.55) - 2.3 x 10000 - 10000 - 2500

= $72925

Option C is correct

PARTICULARS White Division Grey Division Sales (net) 600000 440000 Salary expense 32000 52000 Cost of goods sold 140000 163000 Rent Allocation (54000 x 24000/58000 , 34000/58000) 22345 31655 Gross profit ( Sales - Cost of goods sold) 460000 277000

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