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Calculate the amount of the decrease in company profits

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Reference no: EM133119783

Question 1 - Johnson Company manufactures and sells different colors of dry erase markers. Results from last year from the sale of green markers is given below:

Variable costs $316,000

Sales revenue (79,000 units @ $4 each) $237,000

Contribution margin $79,000

Fixed costs:

Salaries of line supervisors $43,000

Advertising expense $28,000

Allocated general overhead $19,000

Net loss $<11,000>

Johnson Company is considering eliminating the green dry erase markers product line. The company has determined that if the green markers are discontinued, the contribution margin of its other products will increase by $7,000.

Required - Calculate the amount of the decrease in company profits if the green dry erase markers product line is discontinued.

Question 2 - Joel Company produces and sells two products, A and U. Revenue and cost information for the two products from last month appear below:

 

Product A

Product U

Selling price per unit

$46

$90

Variable costs per unit

$28

$83

Each month Joel Company has 72,000 direct labor hours available and 81,000 machine hours available. Product A requires 8 direct labor hours for each unit and 2 machine hours for each unit. Product U requires 3 direct labor hours for each unit and 6 machine hours for each unit.

Required - Calculate the number of units of Product A that should be produced in order to maximize net income.

Reference no: EM133119783

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