Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Chapter 10, Problem 6EA
Reuben’s Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are:
A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided, If Reuben accepts the offer, what will the effect on profit be?
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Maple Inc. manufactures a product that costs $25 per unit plus $43,000 in fixed costs each month. Maple currently sells 6,000 of these units per month for $47 each. If Maple leased a machine for $12,000 a month, it could add features to the product that would allow it to sell for $53 each. It would cost an additional $9 per unit to add these features. How much would Maple's profit be affected if it leased the machine and added features to its product?
Multiple Choice
Increase $252,000
Decrease $252,000
Increase $6,000
Decrease $30,000
A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what will the effect on profit be?
Increase in profit of $1,600 if he buys the rolls
Increase in profit of $1,200 if he buys the rolls
Decline in profit of $1,200 if he buys the rolls
Decline in profit of $1,600 if he buys the rolls
The Arthur Company manufactures kitchen utensils. The company is currently producing well below its full capacity. The Benton Company has approached Arthur with an offer to buy 10,000 utensils at $0.65 each. Arthur sells its utensils wholesale for $0.75 each; the average cost per unit is $0.72, of which $0.15 is fixed costs. If Arthur were to accept Benton's offer, what would be the increase in Arthur's operating profits?
Chapter 10 Solutions
Principles of Accounting Volume 2
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