Question

1. The Bash Company has two divisions—Office and Home . The divisions have the following revenues and expenses:
Office Home
Sales 800,000 900,000
Variable costs (280,000) (200,000)
Direct fixed costs (430,000) (320,000)
Allocated corporate costs (120,000) (250.000)
Net income (loss) (30,000) 130,000

The management at Bash is pondering the elimination of the Office Division. If the Office Division were eliminated, its direct fixed costs could be avoided, but its total corporate costs would not be affected. Given these data, the elimination of the Office Division would result in an overall company net income of:
a. $100,000. c. $(300,000).
b. $130,000. d. $10,000.

2. Benoit Company produces three products, D, E, and F. Cost and revenue characteristics of the three products follow (per unit):
                                                                                                                      Product                                        .
                                                                                    D E F
Selling price $40 $25 $37
Less variable expenses:
   Direct materials 12 8 6
   Labor and overhead 13 9 19
      Total variable expenses 25 17 25

Contribution margin $15 $ 8 $12

Contribution margin ratio                          40%                                 25%                                    30%

Demand for the company’s products is very strong, with far more orders on hand each month than the company has raw materials available to produce. The same material is used in each product. The material costs $2 per pound, with a maximum of 8,000 pounds available each month. In what order should the company fill the demand for the three products?
a. D,E,F
b. E.D.F
c. F,D,E
d. E,F,D







Questions 3 and 4 refer to the following:
The Munsen Company produces a single product called a Doodad. Munsen has the capacity to produce 50,000 Doodads each year. If Munsen produces at capacity, the per unit costs to produce and sell one Doodad are as follows:
Direct materials $24
Direct labor 15
Variable factory overhead 9
Fixed factory overhead 6
Variable selling expense 8
Fixed selling expense 7

The regular selling price for one Doodad is $75. A special order has been received by Munsen from Shoel Company to purchase 8,000 Doodads during 2015. If this special order is accepted, the variable selling expense will be reduced by 50%. However, Munsen will have to purchase a specialized machine to engrave the Shoel name on each Doodad in the special order. This machine will cost $24,000 and it will have no use after the special order is filled and no resale value. All other fixed costs will be unaffected by the special order.

3. Assume that Munsen can only sell 42,000 units of Doodads to regular customers during 2015. What is the relevant cost per unit of producing the special order for Shoel?
a. $51.00
b. $69.00
c. $55.00
d. $58.00

4. Assume Munsen can sell 44,000 units of Doodads to regular customers during 2015. If Shoel Company offers to buy the special order units at $69 per unit, the effect of accepting the special order on Munsen’s net income for 2015 will be a:
a. $106,000 increase.
b. $112,000 increase.
c. $74,000 increase.
d. $88,000 increase.

5. Manfield Co. is considering the sale of Product X, created from a joint process. Joint processing costs up to the split-off point allocated to Product X are $16,000. Product X can be sold at the split-off point for $25,000. Alternatively, Manfield can process Product X further at a cost of $7,000 and sell the the product for $35,000 after further processing. The dollar advantage or disadvantage of a decision to further process Product X would be:
a. advantage of $12,000
b. disadvantage of $7,000
c. advantage of $3,000
d. disadvantage of $2,000

Answer 1

Answer To Question no 1
		Home
Sales			900000
Less:
	Variable Costs	200000
	Direct Fixed Cost	320000
	Corporate Cost	370000	890000
	Net Income		10000
	Hence, Company's net Income will be $ 10000.

Answer to Question No -02
		PRODUCTS
		D	E	F
	Contribution Per Unit of Out Puts	$15	$8	$12
	Direct Material Cost Per Unit of Output	12	8	6
	Material cost for each unit of material	$2	$2	$2
	No of Raw Materilas used for each unit of Output	6	4	3
	Contribution per unit of Raw Materials	2.5	2	4
	Ranking	II	III	I
	So The company should produce in the order of FDF to fill the demands of three products

Answer to Question No -03
	Statemnet showing Relevent cost per unit of Producing the Special Order of Shoes
	Particulars		Amount in $
	Direct Material per unit		$24
	Direct Labour Per Unit		$15
	Varriable Factory Overhead Per Unit		$9
	Varriable Selling Expenses per Unit		$4
	Machine Cost Per Unit		$3
	Relevent cost per Unit		$55

Answer to Question No -04
	Statement Showing Contribution per unit of Output when sale to regular Customer
	Particulars	Amount in $	Amount in $
	SP per unit		75
	Less:
	Direct Material per unit	24
	Direct Labour Per Unit	15
	Varriable Factory Overhead Per Unit	9
	Varriable Selling Expenses per Unit	8	56
	Contribution per unit		19
	Statement Showing Contribution per unit of Output on special Order
	Particulars	Amount in $	Amount in $
	SP per unit		69
	Less:
	Relevent cost per Unit		55
	Contribution per unit		14
	Statement showing Effect on Company's Net Income
	Increase in Income from Sale of Special Order	(8000 X $ 14 )	$ 112000
	Less :
	Decrease in Income for Contribution foregone on 2000 units	( 2000 X $ 19 )	$ 38000
	Net Decrease in Net Income of the company		$ 74000

Answer to Question No -05
	Dollar advantage on decision of futher processing is $ 3000
	Statement Showing Income when sale at split off point
	Sale	25000
	Less :   Cost upto split off point	16000
	Net Income	9000
	Statement Showing Income when sale after further processing
	Sale	35000
	Less :
	Cost upto split off point	16000
	Cost of further process cost	7000
	Net Income	12000
	Hence Dollar advantage of further processing = ( $ 12000 - $ 9000 ) = $ 3000