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15. Magpie Corporation uses the total cost concept...




15. Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000. Fixed factory overhead cost $38,700 Fixed selling and administrative costs 7,500 Variable direct materials cost per unit 4.60 Variable direct labor cost per unit 1.88 Variable factory overhead cost per unit 1.13 Variable selling and administrative cost per unit 4.50 The unit selling price for the company's product is: A) $14.76 B) $15.00 C) $13.82 D) $15.80 16. When using the variable cost concept of applying the cost-plus approach to product pricing, what is included in the markup? A) Desired profit B) Total selling and administrative expenses plus desired profit C) Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit D) Total costs plus desired profit 17. The condensed income statement for a business for the past year is as follows: Product T U Sales $660,000 $320,000 Less variable costs 540,000 220,000 Contribution margin $ 120,000 $100,000 Less fixed costs 145,000 40,000 Income (loss) from operations $ (25,000) $ 60,000 Management is considering the discontinuance of the manufacture and sale of Product T at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Product U. What is the amount of change in net income for the current year that will result from the discontinuance of Product T? A) $120,000 increase B) $120,000 decrease C) $25,000 decrease D) $250,000 increase


Paper#11133 | Written in 18-Jul-2015

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