1 Purely Pizza Company sells pizzas in two different sizes—medium and large. The

Question

1 Purely Pizza Company sells pizzas in two different sizes—medium and large. The number of medium pizzas sold is twice the number of large pizzas sold. The contribution margin of a medium pizza is $10 and the contribution margin of a large pizza is $16. The weighted average contribution margin is $15.

2 Jame Company sells glass vases at a wholesale price of $3 per unit. The variable cost of manufacture is $1.75 per unit. The fixed costs are $7,500 per month. Jame sold 5,500 units during this month. Calculate Jame's operating income (loss) for this month.

A) $9,000

B) $625

C) ($625)

D) ($7,500)

9) When the total fixed costs increases, the breakeven point:

A) increases.*****

B) decreases.

C) decreases proportionately.

D) remains the same.

4 Which of the following correctly describes the accounting for advertising costs?

A) Advertising costs are product costs and are expensed as incurred.

B) Advertising costs are period costs and are expensed as incurred.*********

C) Advertising costs are product costs and are expensed when the manufactured product is sold.

D) Advertising costs are period costs and are expensed when the manufactured product is sold.

18) Clay Corporation manufactures two styles of lamps—a Bedford Lamp and a Lowell Lamp. The following per unit data are available:

Bedford Lamp

Lowell Lamp

Sale price

$25

$35

Variable costs

$17

$23

Machine hours required for 1 lamp

2

4

5 Total fixed costs are $30,000. Marketing data indicate that the company can sell up to 8,000 units of the Bedford lamp and up to 4,000 units of the Lowell lamp. Machine hour capacity is 25,000 hours per year. What product mix will deliver the optimum operating income?

A) 4,500 Bedford lamps, 4,000 Lowell lamps

B) 12,500 Bedford lamps, zero Lowell lamps

C) 8,000 Bedford lamps, 2,250 Lowell lamps

D) 7,500 Bedford lamps, 3,000 Lowell lamps

Bedford Lamp

Lowell Lamp

Sale price

$25

$35

Variable costs

$17

$23

Machine hours required for 1 lamp

2

4

Explanation / Answer

For 1st Question what is to be done is not specified.

2 James' Operating Income(Loss) will be as follows.

Contribution Per Unit= ($3-$1.75)= $1.25

Total Contribution= 5500*$1.25

= $6875

Operating Profit(Loss)= Contribution-Fixed Cost

=$6875-$7500

=($625)

9 when the Fixed Cost increases breakeven point increases.Option A is correct

4 Advertising cost are period cost and expensed as incurred. Option B is correct.

5 Contribution Margin Per Machine Hour for Bedford Lamp = ($25-$17)/2

=$4

Contribution Margin Per Machine Hour for Lowell Lamp=($35-$23)/4

=$3

As per Machine Hour Contribution of Bedford Lamp is higher we should first manufacture Bedford Lamp to the extent it can be sold

So 8000 Bedford Lamps and 2250 Lowell Lamps will give the Optimum operating income. Answer C is correct.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.