22) Management at SJ Green Company currently sells its products for $225 per uni

Question

22) Management at SJ Green Company currently sells its products for $225 per unit and is contemplating a 4% increase in the selling price for the next year. Variable costs are currently 25% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will still pay the same variable cost per unit). Fixed expenses are $119,000 per year If fixed costs were to decrease 10% during the current year and the new selling price goes into effect, how many units will need to be sold to breakeven? A) 476 units B) 340 units C 149,940 units D) 414 units 23) A "constraint is best described by which of the following? A) A factor that restricts production or sales of a product B) Benefits foregone by choosing a particular alternative course of action C) Expected future costs that differ among alternatives D) The distribution of all products to be sold 24) Panda Inc produces a part that is used in the manufacture of one of its products. The unit as follows: manufacturing costs of this part, assuming a production level of 6100 units, are Direct materials $4.00 $4.50 53.20 $1.50 $13.20 Total cost DM Company has offered to sell 61,00 units of the same part to Panda Inc $14.40 per unit. Assuming the company has no other use for its facilities, what should Panda Inc. do? A) Make the part and save $2.70 per unit. Q) Make the part and save $10.20 per unit. B) Make the part and save $5.70 per unit. D) Buy from Suri and save $1.20 per unit. 25) Which of the following is not a question that managment needs to consider when deciding to processa product further or sell as isi? A) How much revenue will we receive if we sell the product as is? B) How much storage space will the product take up if we don't process it further? C) How much revenue will we receive after we process the product further? D) How much extra will it cost to process the product further? 26) Part X7 is a part used in the production of air conditioners at A/Cs -R-US. The following costs and data relate to the production of Part XI: 26,000 $41,000 7.000 $108,000 Fixed costs Variable costs Total cost to produce R-Us can purchase the part from an outside supplier for $4.50 per unit.If they purchase from the outside A/Cs- supplier, 50% of the fixed costs would be avoided. If ACS-R-Us buys the part, what is the most can spend per unit so that operating income is equal to $98,000? A) $2.19 B) $2.98 C) $3.77 D) $1.52

Explanation / Answer

Answer 22 - D. $414 Units New SP Per Unit = $225 X 140% = $315 per Unit Variable Cost per Unit = $225 X 25% = $56.25 per Unit Contribution Per Unit = $315 - $56.25 = $258.75 per Unit Fixed Cost = $119,000 X 90% = $107,100 BEP (In Units) = Fixed Costs / Contribution per Unit BEP (In Units) = $107,100 / $258.75 BEP (In Units) = 413.913 or say 414 units (Approx.) Answer 23- A. A Factor that restricts production or sales of a product. Answer 24 - A. Make the part and save $2.70 per Unit Relevant Manufacturing Cost per Unit: Direct Material Cost per Unit           4.00 Direct Labor           4.50 Variable Manufacturing Overhead           3.20 Total Relevant Manufacturing Cost         11.70 Buy Cost per Unit         14.40 Savings in Cost per Unit - Manufacturing           2.70 Answer 25 - B. How much storage space will the product take up if we dn't process it further? All the other questions are relevant and we want to take the decision to process the product or not.

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