Question 1

Lockrite Security Company manufacturers home alarms. Currently, it is manufacturing one of its components at a total cost of $45 which includes fixed costs of $15 per unit. An outside provider of this component has offered to sell Lockrite the component for $40. Provide a differential analysis of the outside purchase proposal.

Accepted Answer

Differenti...

Question 2

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour.
Assuming that Widgeon Co. can sell all of the products it can make, what is the maximum contribution margin it can earn per month?

Accepted Answer

A)   $49,000
B)   $70,000
C)   $56,000
D)   $34,000E) B) and C)
F) None of the above

Question 3

Under the total cost concept, manufacturing cost plus desired profit is included in the total cost per unit.

Accepted Answer

A) True 
 B)False

Question 4

What cost concept used in applying the cost-plus approach to product pricing covers selling expenses, administrative expenses, and desired profit in the markup?

Accepted Answer

A)   total cost concept
B)   product cost concept
C)   variable cost concept
D)   sunk cost conceptE) A) and B)
F) A) and C)

Question 5

The lowest contribution margin per scarce resource is the most profitable.

Accepted Answer

A) True 
 B)False

Exam 10: Differential Analysis and Product Pricing

Correct Answer
verified

Under the total cost concept, manufacturing cost plus desired profit is included in the total cost per unit.

Correct Answer
verified

The lowest contribution margin per scarce resource is the most profitable.

Correct Answer
verified

Correct Answer
verified
Differenti...
View Answer

What cost concept used in applying the cost-plus approach to product pricing covers selling expenses, administrative expenses, and desired profit in the markup?

Correct Answer
verified

Exam 10: Differential Analysis and Product Pricing

Correct AnswerverifiedShow Answer

Under the total cost concept, manufacturing cost plus desired profit is included in the total cost per unit.

Correct AnswerverifiedShow Answer

The lowest contribution margin per scarce resource is the most profitable.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedDifferenti...View AnswerShow Answer

What cost concept used in applying the cost-plus approach to product pricing covers selling expenses, administrative expenses, and desired profit in the markup?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Differenti...
View Answer

Correct Answer
verified