39 a company produces 1 000 packs of chicken feed per month sales price is 4 per pac 4306848

39 a company produces 1 000 packs of chicken feed per month sales price is 4 per pac 4306848

39) A company produces 1,000 packs of chicken feed per month. Sales price is $4 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,800 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will go up from $1.50 to $1.90 per unit, and fixed costs will go up by 20%. The company will price the new product at $5 per pack. How will this affect operating income?

A) Operating income will go down by $150 per month.

B) Operating income will remain unchanged.

C) Operating income will go down by $400 per month.

D) Operating income will go up by $240 per month.

40) A company produces 1,000 packs of chicken feed per month. Sales price is $4 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,800 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will go up from $1.50 to $1.90 per unit, and fixed costs will go up by 20%. At what price for the new product will the two alternatives (sell as is or process further) produce the same operating income? Round to nearest cent.

A) $5

B) $4.76

C) $3.99

D) $4.40

41) A company produces 1,000 packs of chicken feed per month. Sales price is $4 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,800 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will go up from $1.50 to $1.90 per unit, and fixed costs will go up by 20%. The CEO wants to price the new product at a level which will bring operating income up to $1,000 per month. What price is to be charged?

A) $5.00

B) $5.06

C) $4.99

D) $4.76

42) Victory Company makes a special kind of racing tire. Variable costs are $220, and fixed costs are $30,000 per month. Victory sells 500 units per month at a price of $300. If Victory upgrades the quality of the tire, they believe that they can boost the price up to $325. If so, the variable cost will go up to $230 and the fixed costs will remain the same. If Victory decides to upgrade, how will it affect operating income?

A) Operating income will go down by $1,250.

B) Operating income will go down by $5,000.

C) Operating income will go up by $12,500.

D) Operating income will go up by $7,500.

43) Victory Company makes a special kind of racing tire. Variable costs are $220, and fixed costs are $30,000 per month. Victor sells 500 units per month at a price of $300. If Victory upgrades the quality of the tire, they believe they can boost the price up to $325. If so, the variable cost will go up to $230 and the fixed costs will rise by 40%. If Victory decides to upgrade, how will it affect operating income?

A) Operating income will go down by $1,250.

B) Operating income will go down by $4,500.

C) Operating income will go up by $12,500.

D) Operating income will go up by $7,500.

44) Victory Company makes a special kind of racing tire. Variable costs are $220, and fixed costs are $30,000 per month. Victor sells 500 units per month at a price of $300. If Victory upgrades the quality of the tire, they believe they can boost the price up to $340. If so, the variable cost will go up to $230 and the fixed costs will rise by 50%. If Victory decides to upgrade, how will it affect operating income?

A) Operating income will go down by $1,250.

B) Operating income will go down by $4,500.

C) Operating income will go up by $12,500.

D) Operating income remains the same.

45) Victory Company makes a special kind of racing tire. Variable costs are $220, and fixed costs are $30,000 per month. Victory sells 500 units per month at a price of $300. If Victory upgrades the quality of the tire, they believe that they can boost the price. If so, the variable cost will go up to $230 and the fixed costs will rise by 50%. The CEO wishes to increase his operational income by 25%. What price level would give the desired results?

A) $330 per unit

B) $370 per unit

C) $320 per unit

D) $345 per unit

46) Valuable Electronics uses a standard part in the manufacture of different types of radios manufactured by it. The total cost of producing 25,000 parts is $95,000, which includes fixed costs of $40,000 and variable costs of $55,000. The company can buy the part from an outside supplier for $3 per unit, and avoid 20% of the fixed costs.

If Valuable Electronics decides to outsource the production of the part, how will it impact its operating income?

A) increase of $12,000

B) decrease of $12,000

C) increase of $20,000

D) decrease of $20,000

47) Brio Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows:

Direct materials

$5

Direct labor (variable cost)

6

Variable manufacturing overhead

3

Fixed manufacturing overhead

4

Total cost

$18

Fine Company has offered to sell 6,000 units of the same part to Brio Company for $17.50 per unit. Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable. What should Brio Company do?

48) Enthusiastic Products is deciding whether to outsource production of a certain component that is included in all of its products. It currently costs Enthusiastic Products $1.20 to make each component in-house. If Enthusiastic Products outsources, it can buy the component ready-made for $0.90 each, and can shut down the production facilities it is currently using to manufacture the component, and save $20,000 a year in fixed costs. Annual requirement for the component is 12,000 units. What is the effect of outsourcing?

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