15. Unit selling price = $230; Variable cost per unit = $130; Fixed Costs = $36,
ID: 2634372 • Letter: 1
Question
15. Unit selling price = $230; Variable cost per unit = $130; Fixed Costs = $36,000;
Tax rate = 40%. How many units should Small Grill sell to achieve an after-tax target income of $6,000?
A) 200
B) 460
C) 230
D) 300
16. Western Apparel Company owns two stores and management is considering eliminating the East store due to declining sales. Segmented contribution income statements are as follows and common fixed costs are allocated on the basis of sales.
West East Total
Sales $525,000 90,000 $615,000
Variable costs 262,500 45,000 307,500
Direct fixed costs 62,500 25,000 87,500
Segment margin 200,000 20,000 220,000
Allocated fixed costs 137,500 35,000 172,500
Net Income $62,500 ($15,000) $47,500
Western feels that if they eliminate the East store that sales in the West store will decline by 25%. If they close the East store, overall company net income will:
A) decline by $90,000.
B) decline by $62,000.
C) decline by $85,625.
D) decline by $20,000.
Information for Questions 18
Anderson Manufacturing makes a single product. Budget information regarding the current period is given below:
Revenue (100,000 units at $8.00) $800,000
Direct materials 150,000
Direct labor 125,000
Variable manufacturing overhead 235,000
Fixed manufacturing overhead 110,000
Net income $180,000
Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders. However, Anderson is operating at capacity and will incur an additional $50,000 in fixed manufacturing overhead if the order is accepted.
18. What is the incremental income (loss) associated with accepting the special order?
A) ($14,000)
B) $36,000
C) ($23,500)
D) $27,000
20. On July 26, 2012, radio Shack announced disappointing 2nd quarter earnings that caused the stock to fall 29% to all time lows. Although sales were up 1.2% to $953.2 million gross profit fell 16.6% to $360.3 million. Assuming Radio Shack
Explanation / Answer
15. C) 230
16. Segment margin 200,000 20,000 220,000
17. C) decline by $85,625.
18. D) $27,000
20. A) Opportunity costs decreased.
24. B) $142,957
25. D) Return on equity for the most recent quarter for Microsoft is higher than return on equity for Google.
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