29 Jun Question Keith Company is a two-division firm
QuestioQuestion
Keith Company is a two-division firm n
Keith Company is a two-division firm and has the following information available for this year:
Common fixed costs $ 800,000
Direct fixed costs of Division A 200,000
Direct fixed costs of Division B 400,000
Sales revenue of Division A 800,000
Sales revenue ofDivision B 1,200,000
Variable costs of Division A 240,000
Variable costs of Division B 360,000
What is Division A’s contribution margin?
A) $840,000
B) $440,000
C) $560,000
D) $(240,000)
Exhibit 1: The Testa Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of$100,000, they can be sold for a total of$160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.
I. Refer to Exhibit 1. The sunk cost in this situation is:
2. Refer to Exhibit 1: What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?
3. Refer to Exhibit 1. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?
Exhibit 2: The Wright Company has established standard cost for its single product as follows:
Direct material ………………………….. 2 gallons at $3 per gallon Direct labor ……………………………… 0.5 hours at $8 per hour Variable overhead ……………………….. 0.5 hours at $2 per hour
During May, the company made 4,000 units and incurred the following costs: Direct materials purchased: 8,100 gallons at $3.I 0 per gallon
Direct material used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual Variable overhead cost:$4,175
4. Refer to Exhibit 2. The materials price variance is:
5. Refer to Exhibit 2. The materials quantity variance is:
6. Refer to Exhibit 2. The labor rate variance is:
on, showing your calculation, and overall company’s net operating income or loss, before and after eliminating Northern Division.
6. United Corporation manufactures laser printers. United currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums are as follows:
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