1. Stellar Company has the following sales, variable cost, and fixed cost. If sa
ID: 2767128 • Letter: 1
Question
1. Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by $10,000 then their profit increases/decreases by how much? Sales $50,000 Variable Costs $8,200 Fixed Costs $29,000
2.
Delfi Company produces two models of seats, Toro and Prep. Information regarding these products for May follows:
Toro Prep
Number of units
3,000
7,000
Sales revenue $120,000 $140,000
Variable costs 60,000 42,000
Fixed costs
24,000
50,000
Net Income
$36,000
$48,000
Pounds of plastic to produce one bucket 4.0 1.6
Contribution margin per unit $20 $14
Due to increased demand of plastic in the market, Delfi Company can obtain only 9,000 pounds of plastic per month. Delfi can sell as many seats as it can produce of either model. How many of each model should Delfi produce to maximize profit in May considering the constraint?
Question 17 options:
A. Toro: 0; Prep: 4,375
B. Toro: 2,250; Prep: 0
C. Toro: 1,125; Prep: 2,812
D. Toro: 0; Prep: 5,625
Explanation / Answer
1- Varriable Cost Ratio= 8200/50000 =16.40% of Sales
Contribution Margin Ratio =100-16.40= 83.60%
Increase in Profit due to increase in (Sales 10000) = 10000*83.60% =$8360
2- D. Toro: 0; Prep: 5,625
Company will produce Maximum Unit of Prep because it gives higher contribution per Pound of Material constraint.
Toro Prep Contribution per unit $20.00 $14.00 Plastic required per Unit(Pound) 4 1.6 Contribution perPound of Plastic $5.00 $8.75 Rank for Production I II Maximum Demand Unlimited Unlimited Material Available (Pound) 9000 No. of Unit to be produced(9000/1.6) 0 5625Related Questions
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