Question

Question 25 Which of the following is the correct formula for the profit margin ratio? Not yet answered Marked out of 2.00 Select one: O A. Net profit * Capital invested O B. Net profit/ Sales P Flag question C. Net sales / Average total assets OD. Operating income / Net sales Question 26 Costs that do not differ between alternatives are Not yet answered Marked out of 2.00 P Flag question Select one: O A. important only if they represent a material dollar amount O B. considered opportunity costs O C. considered irrelevant to the decision O D. relevant to the decision

Answer 1

answer 25) correct option is B) net profit/sales

answer 26) correct option is C) cosidered irrelevant to the decision

answer 27) correct option is D) a process of ranking and choosing among the alternative capital investments based on availability of the funds

answer 28) calculation of highest operating income of product mix :

calculation of contribution per hour and rank :

particular	bedford lamp	lowell lamp
sales price	$25	$35
less : variable costs	-$17	-$23
contribution	$8	$12
machine hour per lamp	2	4
contribution per machine hour	$8/2 = $4	$12/4 = $3
rank	I	II

calculation of product mix as per available 20000 machine hours capacity :

option A) 10000 bedford lamp and 0 lowell lamp :

particular	machine hour per lamp	no. of lamps	total machine hour
bedford lamp	2	10000	10000 x 2 = 20000
lowell lamp	4	0	0 x 4hours = 0
total hours			20000
less : total available hours			-20000
hour left or more required			0

option B) 5000 bedford lamp and 10000 lowell lamp :

particular	machine hour per lamp	no. of lamps	total machine hour
bedford lamp	2	5000	5000 x 2 = 10000
lowell lamp	4	10000	10000 x 4 = 40000
total hours			50000
less : total available hours			-20000
more hour required			30000

this option can not be produced due to availability of machine hours.

option C) 10000 bedford lamp and 10000 lowell lamp :

particular	machine hour per lamp	no. of lamps	total machine hour
bedford lamp	2	10000	10000 x 2 = 20000
lowell lamp	4	10000	10000 x 4 = 40000
total hours			60000
less : total available hours			-20000
more hour required			40000

this option can not be produced due to availability of machine hours.

option D) 0 bedford lamp and 5000 lowell lamp :

particular	machine hour per lamp	no. of lamps	total machine hour
bedford lamp	2	0	0 x 2 = 0
lowell lamp	4	5000	5000 x 4 = 20000
total hours			20000
less : total available hours			-20000
hour left or more required			0

this option can not be produced due to availability of machine hours.

so option A and option D can be produced as per available machine hours.

calculation of operating income of product mix of option A and D :

paticular	10000 bedford lamp and 0 lowell lamp	0 bedford lamp and 5000 lowell lamp
	10000 bedford lamp	0 lowell lamp	total	0 bedford lamp	5000 lowell lamp	total
sales	10000 x $25 = $250000	0 x $35 = 0	$250000	0 x $25 = 0	5000 x $35 = $175000	$175000
less : variable costs	10000 x $17 = -$170000	0 x $23 = 0	-$170000	0 x $17 = 0	5000 x $23 = -$115000	-$115000
contribution	$80000	0	$80000	0	$60000	$60000
less : fixed costs			-$40000			-$40000
operating income			$40000			$20000

option A) 10000 bedford lamp and 0 lowell lamp has the highest operating profit.

so correct option is A) 10000 bedford lamp and 0 lowell lamp

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