Crede company sells a single product that has variable

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Reference no: EM13355538

Crede Company sells a single product that has variable costs of $10 per unit.  Fixed costs will be $700,000 across all levels of sales shown.

Units Sold

Price per unit

80,000

$35

90,000

$33

100,000

$31

110,000

$30

120,000

$28

Q1. What price should Crede charge to maximize profits?

A)   $28

B)   $30

C)   $35

D)   $31

E)    $33

 

Q2. What price would Crede charge to maximize revenues?

A)   $30

B)   $31

C)   $35

D)   $28

E)    $33

 

Q3. What, if any information given was not relevant to the profit maximization decision?

A)   The variable costs per unit

B)   The quantities demanded

C)   All of the information was relevant

D)   The selling prices

E)    The total fixed costs

Anderson Manufacturing makes a single product.  Budget information regarding the current period is given below:

Revenue (100,000 units at $8.00)

$800,000

Direct materials

150,000

Direct labor

125,000

Variable manufacturing overhead

235,000

Fixed manufacturing overhead

110,000

Net income

$180,000

Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders.  However, Anderson is operating at capacity and will incur an additional $50,000 in fixed manufacturing overhead if the order is accepted.

Q4What is the incremental income (loss) associated with accepting the special order?

A)   ($14,000)

B)   $36,000

C)   ($23,500)

D)   $27,000

 

Q5What is the incremental revenue associated with accepting the special order?

A)   $170,000

B)   $112,500

C)   $70,000

D) $120,000

Reference no: EM13355538

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