1. Riddell Company manufactures one type of basketball. Each basketball is sold

Question

1.

Riddell Company manufactures one type of basketball. Each basketball is sold for $55 and the individual contribution margin is $27. Total fixed costs are $185,000 annually. Included in fixed costs are two production supervisor’s salaries of $96,000. Management estimates that production supervisors can effectively oversee the production of 6,000 basketballs. After that, an additional production supervisor needs to be hired. Production supervisor’s salaries are a:

Select one:

a. Variable cost

b. Mixed cost

c. Opportunity cost

d. Step cost

2.

Litke Corporation, a company that produces and sells a single product, has provided its contribution format income statement for February.

Sales (5,400 units)..............$ 129,600

Variable expenses................... 59,400

Contribution margin.............. 70,200

Fixed expenses.......................54,600

Net income............................ 15,600

If the company sells 5,100 units, its net operating income should be closest to:

Select one:

a. $15,600

b. $11,700

c. $8,400

d. $14,733

3.

Snyder, Inc. manufactures three types of golf balls; the Worm-burner, the Escalator, and the Slice. Over the past year, variable expenses (related to sales price) have been 32%, 40%, and 20%, respectively. Sales prices per 6-pack have been $20, $25, and $30, respectively and sales by golf ball (as a percentage of total sales) have been 40%, 30%, and 40%. Which of the following is the best description of the sales mix?

Select one:

a. The three types of golf balls sold by Snyder, Inc.

b. The relationship of variable expenses to sales price

c. The sales price per 6-pack

d. Sales by golf ball type as a percentage of total sales

Explanation / Answer

Part 1

d. Step cost

Step are Fixed cost that increases to a new level in step with the significant changes in activity or usage

part 2

Contibution per unit =70200/5400 13 total Contrbution =13*5100 66300 Net income =66300-54600 11700

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