COMM 305/ACCO 240
John Molson School of Business
Final Examination Winter 2004
The Madison Company produces three products with the following costs and selling prices:
Selling Price per Unit
Variable Cost per Unit
Contribution Margin per Unit
Direct Labour Hours per Unit
Machine Hours per Unit
If the number of machine hours is the production constraint, in which order should Madison
produce the three products? (2 marks)
A, B, C
A, C, B
B, C, A
C, A, B.
Products A, B, and C are produced from a single raw material input. The raw material costs are
$90,000, from which 5,000 units of A, 10,000 units of B, and 15,000 units of C can be produced
each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed
further at a cost of $12,500 and then sold for $5 per unit. What is the correct course of action
regarding Product A?
A. It should be sold at the split-off point, since further processing would result in a loss of $0.50
It should be processed further, since this will increase profits by $2,500 each period.
It should be sold at the split-off point, since further processing will result in a loss of $2,500
D. It should be processed further, since this will increase profits by $12,500 each period.