Reference no: EM139711

Crede Company sells a single product that has variable costs of $10 per unit.  Fixed costs will be $700,000 across all levels of sales shown.

Units Sold	Price per unit
80,000	$35
90,000	$33
100,000	$31
110,000	$30
120,000	$28

Q1. What price should Crede charge to maximize profits?

A)   $28

B)   $30

C)   $35

D)   $31

E)    $33

 

Q2. What price would Crede charge to maximize revenues?

A)   $30

B)   $31

C)   $35

D)   $28

E)    $33

 

Q3. What, if any information given was not relevant to the profit maximization decision?

A)   The variable costs per unit

B)   The quantities demanded

C)   All of the information was relevant

D)   The selling prices

E)    The total fixed costs

Anderson Manufacturing makes a single product.  Budget information regarding the current period is given below:

Revenue (100,000 units at $8.00)	$800,000
Direct materials	150,000
Direct labor	125,000
Variable manufacturing overhead	235,000
Fixed manufacturing overhead	110,000
Net income	$180,000

Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders.  However, Anderson is operating at capacity and will incur an additional $50,000 in fixed manufacturing overhead if the order is accepted.

Q4. What is the incremental income (loss) associated with accepting the special order?

A)   ($14,000)

B)   $36,000

C)   ($23,500)

D)   $27,000

 

Q5. What is the incremental revenue associated with accepting the special order?

A)   $170,000

B)   $112,500

C)   $70,000

D) $120,000