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Business Accounting

It costs Ross Co. $24 of variable and $10 of fixed costs to produce one bathroom scale which normally sells for $70. A foreign wholesaler offers to purchase 2,000 scales at $30 each. Ross would incur special shipping costs of $2 per scale if the order were accepted. Ross has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?

 

Carter, Inc. can make 100 units of a necessary component part with the following costs:

Direct Materials $120,000
Direct Labor 20,000
Variable Overhead 60,000
Fixed Overhead 40,000

If Carter purchases the component externally, $30,000 of the fixed costs can be avoided. At what external price for the 100 units is the company indifferent between making or buying?

 

 

Mink Manufacturing is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Mink would sell it for $130. The cost to assemble the product is estimated at $42 per unit and the company believes the market would support a price of $170 on the assembled unit. What decision should Mink make?

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Category: Sample Questions