25 macaulay roller skates company has three product lines d e and f the following in 4307755

25 macaulay roller skates company has three product lines d e and f the following in 4307755

25) Macaulay Roller Skates Company has three product lines—D, E, and F. The following information is available:

D

E

F

Sales

$70,000

$40,000

$30,000

Variable costs

(40,000)

(20,000)

(10,000)

Contribution margin

30,000

20,000

20,000

Fixed expenses

(15,000)

(15,000)

(25,000)

Operating income (loss)

$15,000

$5,000

($5,000)

The company is thinking of dropping product line F because it is reporting an operating loss. Assuming fixed costs are unavoidable, if Macaulay drops product line F, and rents the space formerly used to produce product F for $17,000 per year, total income will be ________.

A) $10,000

B) $12,000

C) $20,000

D) $25,000

26) Macaulay Roller Skates Company has three product lines—D, E, and F. The following information is available:

D

E

F

Sales

$70,000

$40,000

$30,000

Variable costs

(40,000)

(20,000)

(10,000)

Contribution margin

30,000

20,000

20,000

Fixed expenses

(15,000)

(15,000)

(25,000)

Operating income (loss)

$15,000

$5,000

($5,000)

The company is thinking of dropping product line F because it is reporting an operating loss. Assume that $15,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?

A) Operating income will increase by $25,000.

B) Operating income will increase by $20,000.

C) Operating income will decrease by $5,000.

D) Operating income will decrease by $15,000.

27) Macaulay Roller Skates Company has three product lines—D, E, and F. The following information is available:

D

E

F

Sales

$70,000

$40,000

$30,000

Variable costs

(40,000)

(20,000)

(10,000)

Contribution margin

30,000

20,000

20,000

Fixed expenses

(15,000)

(15,000)

(25,000)

Operating income (loss)

$15,000

$5,000

($5,000)

The company is thinking of dropping product line F because it is reporting an operating loss. Assume that $25,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?

A) Operating income will increase by $25,000.

B) Operating income will increase by $5,000.

C) Operating income will decrease by $25,000.

D) Operating income will decrease by $5,000.

28) The income statement for Sweet Dreamz Company is divided by its two product lines, blankets and pillows, as follows:

Blankets

Pillows

Total

Sales revenue

$620,000

$300,000

$920,000

Variable expenses

(465,000)

(240,000)

(705,000)

Contribution margin

$155,000

$60,000

$215,000

Fixed expenses

(76,000)

(76,000)

(152,000)

Operating income (loss)

$79,000

$(16,000)

$63,000

Sweet Dreamz is considering eliminating the pillows product line. If they do so, they will be able to eliminate $76,000 of total fixed costs. How would that business decision impact operating income?

A) increase $76,000 in operating income

B) decrease $60,000 in operating income

C) increase $42,000 in operating income

D) increase of $16,000 in operating income

29) Which of the following statements describes a scenario when management should consider dropping a business division?

A) The division has been reporting an operating loss consistently.

B) The division's avoidable fixed costs are less than its contribution margin.

C) The division's avoidable fixed costs are greater than its contribution margin.

D) The division's unavoidable fixed costs are greater than its operating loss.

30) 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

Total fixed costs are $30,000, and Clay can sell a maximum of 10,000 units of each style of lamp annually. Machine hour capacity is 25,000 hours per year. What is the contribution margin per machine hour for the Bedford lamp?

A) $4 per machine hour

B) $2 per machine hour

C) $6 per machine hour

D) $8 per machine hour

31) 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

Total fixed costs are $30,000, and Clay can sell a maximum of 10,000 units of each style of lamp annually. Machine hour capacity is 25,000 hours per year. What is the contribution margin per machine hour for the Lowell lamp?

A) $4 per machine hour

B) $2 per machine hour

C) $3 per machine hour

D) $12 per machine hour

32) 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

Total fixed costs are $30,000. Machine hour capacity is 25,000 hours per year. Assuming that the company can sell as many products as it can make, which product mix would deliver the highest operating income?

A) 10,000 Bedford lamps and 1,250 Lowell lamps

B) Zero Bedford lamps and 6,250 Lowell lamps

C) 12,500 Bedford lamps and zero Lowell lamps

D) 12,500 Bedford lamps and 12,500 Lowell lamps

33) 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

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. Which product mix will deliver the optimum operating income?

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

B) 12,500 Bedford lamps and zero Lowell lamps

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

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

34) Todd Corporation produces two products, P and Q. P sells for $5 per unit; Q sells for $6.50 per unit. Variable costs for P and Q are $3 and $4.50, respectively. There are 4,300 direct labor hours per month available for producing the two products. Product P requires 4 direct labor hours per unit and Product Q requires 5 direct labor hours per unit. The company can sell as many of either product as it can produce. What is the maximum monthly contribution margin that Todd can generate under the circumstances? (Round to nearest whole dollar.)

A) $2,150

B) $1,505

C) $1,500

D

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