Sweet Products fixed cost

All other things being equal, a company that sells multiple products should attempt to
structure its sales mix so the greatest portion of the mix is composed of those products
with the highest:
a. selling price.
b. variable cost.
c. contribution margin.
d. fixed cost.
e. gross margin.

*44. GoGrow produces shovels and rakes. Sales and costs for the most recent year are
indicated below:
Shovels Rakes Total
Units 8,000 20,000 28,000
Sales revenue $160,000 $40,000 $200,000
Variable costs 98,000 18,000 116,000
Fixed costs 28,000 12,000 40,000
Profit $ 34,000 $10,000 $ 44,000
The number of units and selling price per unit appears to be stable for the
foreseeable future. How much total revenue will GoGrow have at breakeven?
A. $95,238
B. $13,333
C. $146,663
D. $156,000

39. Snider, Inc., which has excess capacity, received a special order for 4,000 units at
a price of $15 per unit. Currently, production and sales are budgeted for 10,000
units without considering the special order. Budget information for the current
year follows.
Sales $190,000
Less: Cost of goods sold 145,000
Gross margin $ 45,000
Cost of goods sold includes $30,000 of fixed manufacturing cost. If the special
order is accepted, the company's income will:
A. increase by $2,000.
B. decrease by $2,000.
C. increase by $14,000.
D. decrease by $14,000.
E. change by some other amount


HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe. The company, which uses activity-based costing, has identified
five activities (and related cost drivers). Each activity, its budgeted cost, and related cost
driver is identified below.
Activity Cost Cost Driver
Material handling $ 225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated machinery 840,000 Machine hours
Finishing 170,000 Direct labor hours
Packaging 170,000 Orders shipped
Total $3,880,000
IMBA 6050 Final Exam Page 8 of 18
The following information pertains to the three product lines for next year:
Economy Standard Deluxe
Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per unit 10 15 25
Machine hours per unit 1 3 5
Labor hours per unit 2 2 2
*19. Under an activity-based costing system, what is the per-unit cost of Standard?
A. $164.
B. $228.
C. $272.
D. $282.
*20. Assume that HiTech is using a volume-based costing system, and the preceding
manufacturing costs are applied to all products based on direct labor hours.
How much of the preceding cost would be assigned to Deluxe?
A. $456,471.
B. $646,471.
C. $961,176.
D. $1,141,176.


14. Fletcher Company disposes of under- or overapplied overhead at year-end as an
adjustment to cost of goods sold. Prior to disposal, the firm reported cost of
goods sold of $590,000 in a year when manufacturing overhead was
underapplied by $15,000. If sales revenue totaled $1,400,000, determine (1)
Fletcher's adjusted cost of goods sold and (2) gross margin.
Adjusted Cost
of Goods Sold
Gross Margin
A. $575,000 $810,000
B. $575,000 $825,000
C. $590,000 $810,000
D. $605,000 $795,000
E. $605,000 $810,000

13. Carlson charges manufacturing overhead to products by using a predetermined
application rate, computed on the basis of labor hours. The following data
pertain to the current year:
Budgeted manufacturing overhead: $1,600,000
Actual manufacturing overhead: $1,632,000
Budgeted labor hours: 50,000
Actual labor hours: 48,000
Which of the following choices denotes the correct status of manufacturing
overhead at year-end?
A. Overapplied by $32,000.
B. Underapplied by $32,000.
C. Overapplied by $68,000.
D. Overapplied by $96,000.
E. Underapplied by $96,000.


Dale Company, which applies overhead at the rate of 190% of direct labor cost,
began work on job no. 101 during June. The job was completed in July and sold
during August, having accumulated direct material and labor charges of $27,000
and $15,000, respectively. On the basis of this information, the total overhead
applied to job no. 101 amounted to:
A. $0.
B. $28,500.
C. $51,300.
D. $70,500.
E. $79,800.

Sweet Products produces mint syrup used by gum and candy companies.
Recently, the company has had excess capacity due to a foreign supplier entering
its market. Sweet Products is currently bidding on a potential order from Red
Sugar Candy for 5,000 cases of syrup. The estimated cost of each case is $27.50, as
follows: direct material, $10; direct labor, $5; and manufacturing overhead,
$12.50. The overhead rate of $2.50 per direct labor dollar is based on estimated
annual overhead of $1,500,000 and estimated direct labor of $600,000, composed
of $400,000 of variable costs and $1,100,000 of fixed costs. The largest fixed cost
relates to depreciation of plant and equipment. Should Sweet Products bid on the
Red Sugar Candy business at $20 per case?
A. No, because the incremental loss will be $7.50 per case.
B. Yes, because the incremental profit will be $1.67 per case.
C. No, because there are too many qualitative considerations.
D. Yes, because the incremental profit will be $2.50 per case. 

Additional Requirements