Question

I sell my product for $10. I have $6 in variable costs. If I process further variable costs, increase to $8 and I can sell my new product for $15. Should I process further? Yes, you'll increase profits by $3 per unit. No, the contribution margin goes down O doesn't matter because the contribution margin stays the same No, it's not profitable QUESTION 33 Trendy corporation needs 15,000 parts. They can buy it for $54. If they made it, the costs would be $6 for Direct Materials, $24 for direct labor, and $26 for variable overhead, and fixed overhead applied $16. The fixed overhead would continue whether they made the part or bought the part. Should they make or buy? O Buy because they save $180,000 Make because they save $30,000 O Buy because they save $30,000 O Make because they save $180,000 QUESTION 34 I soll my product for $10. I have $6 in variable costs. If I process further variable costs. increase to $8 and I can sell my new product for $15. What is the contribution margin for the original product if applied fixed costs are $2? O $4 O $6 O $10 O $2

Answer 1

32 Sell as is Process Further 10 15$ Sales Relavant Costs: Variable Cost Cost to process further Total Relavant costs Income(loss) v000 4 es you'll profits by $3 (7-4) per uni 33 Difference Incremental Analysis Particulars Make Buy Expenses Direct Material Direct Labor 24 Variable Overhead 26 Fixed Overhead 16 Purchase Price Total 16 54 -54 70 Buy Because they save $30,000 (15000* $2) 34 Particulars Sell As is Process Further Sales 10 15 less : Variable Expenses || Contribution Margin 47 Option - $4. Amount In $ If you have any doubts please comment on the answer.