# 19 a company has two different products that sell to separate markets financial data 4352194

19) A company has two different products that sell to separate markets.  Financial data are as follows:

 Product A Product B Total Revenue \$12,000 \$8,000 \$20,000 Variable cost (\$7,500) (\$8,100) (\$15,600) Fixed cost (allocated) (\$3,000) (\$1,000) (\$4,000) Operating income \$1,500 (\$1,100) \$400

Assume that fixed costs of \$500 could be eliminated if product B was dropped; assume furthermore that dropping one product would not impact sales of the other.  If Product B is dropped, what would the impact be on total operating income?

A) Increase \$1,100

B) Increase \$600

C) Increase \$500

D) Increase \$100

20) Easy Cook Company manufactures two products: toaster ovens and bread machines.  The following data are available:

 Toaster Ovens Bread Machines Sale price \$60 \$135 Variable costs \$38 \$62

Easy Cook can manufacture five toaster ovens per machine hour and three bread machines per machine hour. Easy Cook&#39;s production capacity is 1,500 machine hours per month. What is the contribution margin per machine hour for bread machines?

A) \$73

B) \$110

C) \$219

D) \$365

21) Easy Cook Company manufactures two products: toaster ovens and bread machines.  The following data are available:

 Toaster Ovens Bread Machines Sale price \$60 \$135 Variable costs \$38 \$62

Easy Cook can manufacture five toaster ovens per machine hour and three bread machines per machine hour. Easy Cook&#39;s production capacity is 1,500 machine hours per month.  What is the contribution margin per machine hour for toaster ovens?

A) \$110

B) \$125

C) \$219

D) \$365

22) Easy Cook Company manufactures two products: toaster ovens and bread machines.  The following data are available:

 Toaster Ovens Bread Machines Sale price \$60 \$135 Variable costs \$38 \$62

Easy Cook can manufacture five toaster ovens per machine hour and three bread machines per machine hour. Easy Cook&#39;s production capacity is 1,500 machine hours per month, and Easy Cook can sell as many units of either type as it can produce. To maximize profits, what product and how many units should the company produce in a month?

B) 2,250 toaster ovens and 3,750 bread machines

C) 3,750 toaster ovens and 2,250 bread machines

D) 7,500 toaster ovens

23) Easy Cook Company manufactures two products: toaster ovens and bread machines.  The following data are available:

 Toaster Ovens Bread Machines Sale price \$60 \$135 Variable costs \$38 \$62

Easy Cook can manufacture five toaster ovens per machine hour and three bread machines per machine hour. Easy Cook&#39;s production capacity is 1,500 machine hours per month.  Marketing limitations indicate that Easy Cook can sell a maximum of 5,000 toasters a month, and 3,000 bread machines per month. To maximize profits, what product and how many units should the company produce in a month?

B) 2,500 toaster ovens and 3,000 bread machines

C) 3,750 toaster ovens and 2,250 bread machines

D) 7,500 toaster ovens

24) Shine Bright Company has three product lines-D, E, and F. The following information is available:

 D E F Sales \$60,000 \$38,000 \$26,000 Variable costs 36,000 18,000 12,000 Contribution margin 24,000 20,000 14,000 Fixed expenses 12,000 15,000 16,000 Operating income (loss) \$12,000 \$5,000 \$(2,000)

Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss.  Assuming fixed costs are unavoidable, if Shine Bright Company drops product line F and does not replace it, what effect will this have on operating income?

A) Operating income will increase \$2,000.

B) Operating income will increase \$14,000.

C) Operating income will increase \$16,000.

D) Operating income will decrease \$14,000.

25) Shine Bright Company has three product lines-D, E, and F. The following information is available:

 D E F Sales \$60,000 \$38,000 \$26,000 Variable costs 36,000 18,000 12,000 Contribution margin 24,000 20,000 14,000 Fixed expenses 12,000 15,000 16,000 Operating income (loss) \$12,000 \$5,000 \$(2,000)

Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss.  Assuming fixed costs are unavoidable, if Shine Bright Company drops product line F and rents the space formerly used to produce product F for \$17,000 per year, what effect will this have on operating income?

A) Operating income will increase \$3,000.

B) Operating income will increase \$15,000.

C) Operating income will decrease \$14,000.

D) Operating income will decrease \$3,000.

26) Shine Bright Company has three product lines: D, E, and F. The following information is available:

 D E F Sales \$60,000 \$38,000 \$26,000 Variable costs 36,000 18,000 12,000 Contribution margin 24,000 20,000 14,000 Fixed expenses 12,000 15,000 16,000 Operating income (loss) \$12,000 \$5,000 \$(2,000)

Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss.  Assume that \$8,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?

A) Operating income will increase \$3,000.

B) Operating income will increase \$15,000.

C) Operating income will decrease \$6,000.

D) Operating income will decrease \$3,000.

27) Shine Bright Company has three product lines: D, E, and F. The following information is available:

 D E F Sales \$60,000 \$38,000 \$26,000 Variable costs 36,000 18,000 12,000 Contribution margin 24,000 20,000 14,000 Fixed expenses 12,000 15,000 16,000 Operating income (loss) \$12,000 \$5,000 \$(2,000)

Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss.  Assume that \$15,000 of total fixed costs could be eliminated by dropping F.  What effect would this decision have on operating income?

A) Operating income will increase \$3,000.

B) Operating income will increase \$1,000.

C) Operating income will decrease \$6,000.

D) Operating income will decrease \$3,000.

28) The income statement for Sweet Dreams Company is divided by its two product lines, blankets and pillows, as follows:

 Blankets Pillows Total Sales revenue \$620,000 \$300,000 \$920,000 Variable expenses 465,000 240,000 705,000 Contribution margin 155,000 60,000 215,000 Fixed expenses 76,000 76,000 152,000 Operating income (loss) \$79,000 \$(16,000) \$63,000

Sweet Dreams is considering eliminating the pillow product line.  If they do so, they will be able to eliminate \$76,000 of total fixed costs.  In that event, how would that business decision impact operating income?

A) Increase \$76,000

B) Decrease \$60,000

C) Increase \$42,000

D) Increase \$16,000

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