# 12 question tco 7 yxz companys market for the model

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12. Question : (TCO 7) YXZ Company’s market for the Model 55 has changed significantly, and YXZ has had to drop the price per unit from \$275 to \$135. There are some units in the work in process inventory that have costs of \$160 per unit associated with them. YXZ could sell these units in their current state for \$100 each. It will cost YXZ \$10 per unit to complete these units so that they can be sold for \$135 each. When the incremental revenues and expenses are analyzed, what is the financial impact? Student Answer: \$25 per unit profit if the units are completed \$125 per unit if the units are completed \$65 per unit loss if the units are completed \$150 per unit loss if the units are completed (\$135 - \$100) - (\$10 - \$0) = \$25 Instructor Explanation: Chapter 7, Pages 251-252
What are transferred-in costs? Which departments will never have transferred-in costs?
Computer Boutique sells computer equipment and home office furniture. Currently, the furniture product line takes up approximately 50% of the company's retail floor space. The president of Computer Boutique is trying to decide whether the company should continue offering furniture or just concentrate on computer equipment. If furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of computer equipment can increase by 13%. Allocated fixed costs are assigned based on relative sales.
Incremental drop in revenue (\$800,000) Incremental cost savings: Cost of sales 500,000 Salaries 175,000 Other 60,000 Incremental increase in computer equipment (13% x \$1,200,000) 156,000 Incremental increase in computer equipment variable costs (13% x \$700,000) (91,000) Incremental increase in profit \$ 0 The following monthly data are available for RedEx, which produces only one product that it sells for \$84 each. Its unit variable costs are \$28 and its total fixed expenses are \$64,960. Sales during April totaled 1,600 units. (a) How much is the breakeven point in sales dollars for RedEx? (b) How many units must RedEx sell in order to earn a profit of \$24,640? (c) A new employee suggests that RedEx sponsor a company softball team as a form of advertising. The cost to sponsor the team is \$1,792. How many more units must be sold to cover this cost? Student Answer:
=(\$64,960/24,640) /\$56 =\$1,600 Units c) =\$1792/\$56 =32 Units Instructor Explanation: (a) 84X – 28X – 64,960 = 0 X = 1,160 units X = 1,160 × \$84 = \$97,440 (b) (\$24,640 + \$64,960) / (\$84 - \$28) = 1,600 units (c) \$1,792 / (\$84 - \$28) = 32 units