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Chapter 07 Inclass quiz

Chapter 07 Inclass quiz - Clayton has determined that if...

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Acc 200P Name: ________________________ Lab Section #_________________ Chapter 7 Problem I : Heavenly Desserts makes special order cakes. Normally, each cake sells for $70 each. Variable costs per cake are $15 and fixed costs per cake are $10 when 100 cakes are sold each month. The company has been approached by a local charity to make five special order cakes for $30 each. Assuming the company has the excess capacity, what would be the increase or decrease in net income if the special order were accepted? Answer: _____________ Problem II : Clayton Products manufactures a variety of ergonomic household tools including a cordless weed eater. The weed eater comes with a battery recharger. Currently, the company manufactures its own recharger for the weed eater with the following unit costs when 10,000 rechargers are produced each year: Direct materials $10.00 per unit Direct labor $12.00 per unit Variable overhead $ 4.00 per unit Fixed overhead $ 5.00 per unit Another manufacturer has offered to supply Clayton with a recharger for a cost of $29 each.
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Unformatted text preview: Clayton has determined that if they accept the offer, 40% of the fixed overhead allocated to the rechargers will be avoidable. Question : By what amount will the company’s net income increase or decrease if they outsource? Be sure to indicate if net income would increase or decrease. Answer: $________ Problem III: Layno Products installs standard and deluxe walk-in closets. Most of the installation process of the closets is done using direct labor. There are a maximum of 6,000 direct labor hours available each year. Selected data related to each product is as follows: Standard Deluxe Sales price per unit $1,000 $4,000 Variable costs per unit 700 2,000 Direct labor hours per unit 3 6 The company believes that there is sufficient demand for the sale and installation of up to 1,000 standard and 800 deluxe closets each year. Question : How many of each type should be installed in order for the company to maximize profits? Answers: _______ deluxe and ________ standard...
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