[251] Source: Publisher

Answer (A) is correct. Given that $61,500 is

required for advertising and promotion, these are
fixed costs that will have to be covered by the
contribution margin for sales in the new market of
$200 each. The unit contribution margin for regular
sales was $225 (45% x $500 selling price), and there
is a $25 additional variable commission expense for
sales in the new territory. The 45% contribution
margin is computed by dividing the $405,000
contribution margin by the $900,000 of sales. Thus,
the new unit contribution of $200 is divided into
$61,500 of incremental fixed costs, resulting in
additional sales from the new program of 307.5 tons
at the breakeven point.

Answer (B) is incorrect because 1,095.0 tons would

result in a greater profit.

Answer (C) is incorrect because 273.333 tons

ignores the increased commissions in the new
territory.

Answer (D) is incorrect because 1,545.0 tons results

in increased income.

[252] Source: Publisher

Answer (A) is incorrect because 990 tons ignores the

increase in fixed costs.

Answer (B) is correct. The new manufacturing fixed

cost would be $306,000. The new contribution
margin would be $250 per unit, which is the old
contribution margin of $225 plus the $25 of variable
cost savings per ton. Thus, the new breakeven point
would be $306,000 of fixed costs divided by the new
$250 contribution margin per unit, or 1,224 tons.

FC = $247,500 + $58,500 = $306,000

UCM = $225 + $25 = $250
BE = $306,000 ・$250 = 1,224 tons

Answer (C) is incorrect because 1,854 tons would

produce a profit.

Answer (D) is incorrect because 612 tons is half the

breakeven level.

[253] Source: Publisher

Answer (A) is incorrect because it results in an

income of less than $94,500.

Answer (B) is incorrect because it results in an

income of less than $94,500.

Answer (C) is incorrect because $1,500,000 results

in an income above $94,500.

Answer (D) is correct. The selling price per unit will

decrease from $500 to $450. The unit variable costs
will increase from $275 to $315. Also, $157,500 of
pretax profit is required to obtain $94,500 of
after-tax profit [$94,500 ・(1.0 - 40% tax rate)].
Thus, the number of units to be sold equals 3,000
[($247,500 FC + $157,500 pretax profit) ・($450 -
$315) UCM] . Multiplying 3,000 by the selling price
of $450 results in $1,350,000 of sales.

[254] Source: Publisher

Answer (A) is incorrect because a 700-hour

 deficiency is found by subtracting available labor
hours from available machine hours.

Answer (B) is correct. The excess (deficiency) for

machine hours in a given department is found by
initially multiplying machine hours required per unit for
that product by demand for that product. In this case,
the total would be 1,000 for 611, 400 for 613, and
2,000 for 615. The next step is to add these numbers
together to get 3,400, and subtract that from machine
hours available, 3,000. Therefore, the excess
(deficiency) for machine hours would be 3,000 hours
- 3,400 hours to get a 400-hour deficiency.

Answer (C) is incorrect because 0-hour excess is

found by not including the 400 hours from product
613.

Answer (D) is incorrect because 1,100-hour excess

is found by not multiplying the demand for the
products by hours required per unit to produce that
product.

[255] Source: Publisher

Answer (A) is incorrect because a 100-hour

deficiency is found by adding the 400-hour deficiency
in machine hours with the 300-hour excess in labor
hours.

Answer (B) is correct. The excess (deficiency) for

labor hours in a given department is found by initially
multiplying the labor hours required to produce a
product by the demand for that product. The totals
would then be 1,000 for product 611, 400 for
product 613, and 2,000 for product 615. The totals
are then added together to get 3,400 hours. This
number is then subtracted from labor hours available,
3,700, to get an excess of 300 labor hours.

Answer (C) is incorrect because a 700-hour excess

is found by subtracting machine hours available from
labor hours available.

Answer (D) is incorrect because an 1,800-hour

excess is found by not multiplying the labor hours
required to produce a product by the demand for that
product.

[256] Source: Publisher

Answer (A) is correct. The contribution per machine

hour of a given product is found by initially calculating
the contribution margin. Product 615 has a selling
price of $167 and variable costs of $97. This gives a
contribution margin of $70 ($167 - $97). The
contribution per machine hour is then found by
dividing the contribution per unit by the machine
hours required to produce that product, or $70
divided by 2 hours to give a contribution per machine
hour of $35.

Answer (B) is incorrect because $70 is the

contribution margin.

Answer (C) is incorrect because $97 is the amount of

variable costs for product 615.

Answer (D) is incorrect because $167 is the selling

price of product 615.

[257] Source: Publisher

 Answer (A) is incorrect because 400 units is the
amount of product 613 produced.

Answer (B) is incorrect because 500 units is the

amount of product 611 produced.

Answer (C) is correct. When a company has a

scarce resource machine hour capacity, the company
should maximize contribution per machine hour to
maximize overall profits. Because product 615 has
the lowest contribution per machine hour of the three
products, product 615 will be produced using the
remaining hours after product 613 and product 611
have been produced to equal demand. Therefore, the
400 hours needed to produce product 613 and the
1,000 hours needed to produce product 611 are
subtracted from the 3,000 available machine hours.
This leaves a total of 1,600 machine hours for
product 615, which equates to 800 units being
produced.

Answer (D) is incorrect because 1,000 units is the

amount of product 615 that is demanded.

[258] Source: Publisher

Answer (A) is incorrect because $71,250 is found by

multiplying the number of products produced by the
contribution per machine hour.

Answer (B) is correct. The number of units being

produced for each product multiplied by the
contribution margin of the respective product will
equate to the contribution of that product. The
accumulation of the product contributions will give the
total contribution of a department:

Product 613 (400 x $50) $ 20,000

Product 611 (500 x $93) 46,500
Product 615 (800 x $70) 56,000
--------
$122,500
========

Answer (C) is incorrect because $136,500 is found

by incorrectly producing 1,000 units of product 615.

Answer (D) is incorrect because $280,800 is found

by multiplying the number of products produced by
the unit selling price.

[259] Source: Publisher

Answer (A) is incorrect because 10,000 hours is

found by dividing the direct labor per pressure valve
by the manufacturing overhead rate to find the
standard direct labor hour per finished valve.

Answer (B) is correct. The manufacturing overhead

rate is $18 per standard direct labor hour and the
standard product cost includes $9 of manufacturing
overhead per pressure valve. Accordingly, the
standard direct labor hour per finished valve is ｽ
hour ($9 ・$18). Therefore, 30,000 units per month
would require 15,000 direct labor hours.

Answer (C) is incorrect because 30,000 is the

number of pressure valves produced in a month.

Answer (D) is incorrect because 120,000 is the total

number of valves ordered.

[260] Source: Publisher

 Answer (A) is incorrect because a $168,000 loss is
found by using a variable overhead rate of $9 per
unit.

Answer (B) is incorrect because a $120,000 loss is

found by using a variable overhead rate of $9 per
unit.

Answer (C) is correct. The incremental revenue is

found by taking the $19 per unit price and multiplying
it by the 120,000 units ordered. Then, the variable
costs per unit are multiplied by 120,000 to get a
$600,000 cost for materials ($5 x 120,000), a
$720,000 cost for labor ($6 x 120,000), and a
$360,000 cost for overhead ($3 x 120,000). The
variable costs are added to the additional fixed
overhead cost of $48,000 (4 months x $12,000) to
get a total incremental cost of $1,728,000. Then, the
total cost is subtracted from the revenue to get an
incremental profit before tax of $552,000
($2,280,000 - $1,728,000).

Answer (D) is incorrect because a $600,000 profit is

found by not subtracting the fixed overhead.

[261] Source: Publisher

Answer (A) is incorrect because $14 is found by not

adding the fixed cost.

Answer (B) is correct. The minimum unit price

without reducing net income must cover variable
costs plus the additional fixed cost. Therefore, the
three variable costs of $5.00 for direct materials,
$6.00 for direct labor, and $3.00 for variable
overhead are added to the additional fixed cost per
unit $.40 ($48,000 ・120,000). The total is $14.40.

Answer (C) is incorrect because $20 is found by

using a variable overhead rate of $9 and ignoring
fixed overhead.

Answer (D) is incorrect because $20.40 is found by

using a variable overhead rate of $9.