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JamesStone
JamesStone, BA English, Data Analyst, Writer
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Experience:  Degree in English Teaching, Data Analyst 7 years, Private & Public sector work
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Question 1 How are the fixed costs of production treated

Customer Question

Question 1



How are the fixed costs of production treated in determining whether or not to accept a special order?
Answer

They are increased in proportion to the amount production increases when the special order is accepted.
They are considered relevant only when the plant is operating at less than capacity.
If the order can be completed without incurring additional fixed costs, they are not relevant.
They are never relevant in the decision.
2 points
Question 2



Which of the following are relevant in deciding whether to accept or reject a special order?
Answer

The impact the order will have on existing business.
The price that will be charged on the special order.
The incremental cost of filling the special order.
All of the above.
2 points
Question 3



Target costing
Answer

starts with what features customers want and what they will pay for them.
is used after the product has been designed
focuses on including all the features in a product that any customer would want.
all of the above.
2 points
Question 4



The Traxler Company requires a 60% profit margin on its single product. At a price of $78 per unit the company expects to sell16,000 units. The company's target cost should be:
Answer

$31.20
$48.75
$130.00
$46.80
2 points
Question 5



A company has $17.00 per unit in variable costs and $2,000,000 in fixed costs. If the company expects to sell 100,000 units and wishes to earn $500,000 in profit, what markup percentage (to the nearest %) must be applies to the total cost?
Answer

50%
14%
29%
100%
2 points
Question 6



The Dynamaco Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge?
Answer

$14.55
$13.50
$10.95
$12.75
2 points
Question 7



A company believes it can sell 5,000,000 of its proposed new picture cell phone at a price of $300 each. There will be annual fixed costs associated with developing, marketing, and manufacturing the phone of $1,200,000,000. If the company desires to make a profit of 40% of selling price on the picture cell phone, what is the target variable cost per picture cell phone?
Answer

$180
$120
0
There is no positive variable cost that will answer the question.
2 points
Question 8



AJ Company is trying to determine the optimal price to charge for its PUNCH model. AJ has fixed costs of $50,000 and the PUNCH has variable costs of $12.00 per unit. AJ has determined that the following relationships exist between price and demand:

Price
Demand

$20
6,875
$19
8,800
$18
10,000
$17
11,000

Reference: Ref 8-2

What is the anticipated revenue for a price of $19?
Answer

$167,200
$137,500
$350,000
$155,000
2 points
Question 9



Customer profitability analysis would trace which of the following to each customer?
Answer

Sales revenue
Cost of goods sold
Cost of filling the customers order
All of the above
2 points
Question 10



The Warner Company has the capacity to produce 50,000 units per year. The company sells each unit for $122. Budgeted information is as follows:
Revenues
$5,612,000
Direct materials
1,932,000
Direct labor
552,000
Manufacturing overhead (fixed)
276,000
Manufacturing overhead (variable)
552,000
Total
$2,300,000

A special order has been received for 4,000 units to be sold for $78 per unit. The Silva Company would incur an additional $50,000 in total fixed costs in order to lease a special machine in order to make a slight modification to the original product. Should the company accept the special order?
Answer

No, because there is not enough available capacity to fill this order.
Yes, accepting the order would increase profits by $48,000.
Yes, accepting the order would increase profits by $24,000
No, accepting this order would decrease profits by $2,000.
2 points
Question 11



AJ Company is trying to determine the optimal price to charge for its PUNCH model. AJ has fixed costs of $50,000 and the PUNCH has variable costs of $12.00 per unit. AJ has determined that the following relationships exist between price and demand:

Price
Demand

$20
6,875
$19
8,800
$18
10,000
$17
11,000

Reference: Ref 8-2

What is the anticipated profit for a price of $17?
Answer

$55,000
$10,000
$12,000
$5,000
2 points
Question 12



Uribe Company sells a single product that has variable costs of $14 per unit. Fixed costs will remain constant across all levels of sales shown.


Units Sold
Price per unit

80,000
$35

90,000
$33

100,000
$31

110,000
$29

What price should Uribe charge to maximize profits?
Answer

$35
$33
$31
$29
2 points
Question 13



A manufacturing company produces and sells 20
Submitted: 6 years ago.
Category: Homework
Expert:  JamesStone replied 6 years ago.
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