31Perfect Time Company manufactures and sells watches for $36 each. Great Products Company has offered Perfect Time $21 per watch for a one time order of 5,000 watches. The total manufacturing cost...

31Perfect Time Company manufactures and sells watches for $36 each. Great Products Company has offered Perfect Time $21 per watch for a one time order of 5,000 watches. The total manufacturing cost per watch, using standard absorption costing, is $24 per unit, and consists of variable costs of $18 per watch and fixed overhead costs of $6 per watch. Assume that Perfect Time has excess capacity and that the special order would not adversely impact regular sales. What is the change in operating income that would result from accepting the special sales order?

A) Increase of $15,000

B) Decrease of $15,000

C) Increase of $105,000

D) Decrease of $60,000

32Perfect Time Company manufactures and sells watches for $36 each. Value Products Company has offered Perfect Time $16 per watch for a one time order of 1,000 watches. The total manufacturing cost per watch, using standard absorption costing, is $24 per unit, and consists of variable costs of $18 per watch and fixed overhead costs of $6 per watch. Assume that Perfect Time has excess capacity and that the special order would not adversely impact regular sales. What is the change in operating income that would result from accepting the special sales order?

A) Increase of $2,000

B) Decrease of $18,000

C) Increase of $16,000

D) Decrease of $2,000

33Burr Hill golf course is planning for the coming season. Investors would like to earn a 10% return on the company’s $50,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 500,000 rounds of golf are expected to be played each year. Variable costs are about $10 per round of golf. The Burr Hill golf course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Using a cost-plus approach, what price should Burr Hill charge for a round of golf?

A)$50

B)$60

C)$70

D)$80

34Burr Hill golf course is planning for the coming season. Investors would like to earn a 10% return on the company’s $50,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 500,000 rounds of

golf are expected to be played each year. Variable costs are about $10 per round of golf. The Burr Hill golf course is a price-taker and won’t be able to charge more than its competitors, who charge $65 per round of golf. What profit will it earn in terms of dollars?

A)$ 2,500,000

B)$25,000,000

C)$30,000,000

D)$32,500,000

35Dane Metalworks produces a special kind of metal ingots which are unique, and it allows Dane to follow a cost-plus pricing strategy. Dane has $9,000,000 of assets and shareholders expect approximately 8% return on assets. Additional data are as follows:

Using the cost-plus approach, what should the price per unit be? (Please round to the nearest cent.)

A) $22.00

B) $21.67

C) $25.60

D) $22.50

36Outdoor Recworld produces a special kind of light-weight recreational vehicle that has a unique design, and it allows the company to follow a cost-plus pricing strategy. Outdoor Recworld has $8,000,000 of assets and shareholders expect a 12% return on assets. Additional data are as follows:

Using the cost-plus approach, what should the price per unit be?

A) $2,432

B) $2,240

C) $2,560

D) $2,232

37Able Specialty Foods sells jars of special spices used in Spanish cooking. The variable cost is $0.90 per unit. Fixed costs are $8,400,000 per year. Able has $20,000,000 of assets, and investors expect a return of 10% on their assets. Able sells 4,000,000 units per year. . Because they are the only company which produces this kind of product, they use cost-plus pricing. Using cost-plus methodology, how much should the price per unit be? (Please round to the nearest cent.)

A) $3.00

B) $3.50

C) $3.16

D) $3.24

38If a company is a price-taker, which of the following is probably TRUE?

A) The company is in a highly competitive market.

B) The company’s product is unique.

C) The company has considerable flexibility in setting prices of its products.

D) The company clearly differentiates its product from the competitors.

39Grove Company makes special equipment used in cell towers. Each unit sells for $400. Grove uses just- in-time inventor y procedures; they produce and sell 10,000 units per year. They have provided the following income statement data:

A foreign company has offered to buy 80 units for a reduced price of $300 per unit. The marketing manager says the sale will not negatively impact the company’s regular sales. The sales manager says that this sale will not require any incremental selling & administrative costs, as it is a one-time deal. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Grove accepts the deal, how will this impact operating income?

A) Up $16,000

B) Down $8,000

C) Up $24,000

D) Down $42,000

40Grove Company makes special equipment used in cell towers. Each unit sells for $400. Grove uses just- in-time inventory procedures: they produce and sell 10,000 units per year. They have provided the following income statement data:

A European company has offered to buy 50 units for a reduced price of $380 per unit. The marketing manager says the sale will not negatively impact the company’s regular sales. The sales manager says that this sale will require the same amount of variable selling & marketing costs as their regular sales. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Grove accepts the deal, how will this impact operating income?

A) Up $6,000

B) Down $8,000

C) Up $12,000

D) Down $12,000

$19,000 - $7,000 = $12,000