Question 1
Bob's Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits?
Units Sold Price
30,000 $10
40,000 $9
50,000 $8
60,000 $7
Question 2
A retailer purchased some trendy clothes that have gone out of style and must be marked down to 30% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation?
Question 3
Carlton Products Company has analyzed the indirect costs associated with servicing its various customers in order to assess customer profitability. Results appear below:
|
Cost Pool
|
Annual Cost
|
Cost Driver
|
Annual Driver Quantity
|
|
Processing electronic orders
|
$1,000,000
|
Number of orders
|
500,000
|
|
Processing non-electronic orders
|
$2,000,000
|
Number of orders
|
400,000
|
|
Picking orders
|
$3,000,000
|
Number of different products ordered
|
800,000
|
|
Packaging orders
|
$1,500,000
|
Number of items ordered
|
50,000,000
|
|
Returns
|
$2,000,000
|
Number of returns
|
50,000
|
If all costs were assigned to customers based on the number of items ordered, what would be the cost per item ordered?
Question 4
Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton Company has approached Costa about buying 2,000 units for only $300 each. The units would be packaged in bulk, saving Costa $20 per unit when compared to the normal packaging cost. Normally, Costa has a variable cost of $280 per unit. The annual fixed cost of $2,000,000 would be unaffected by the special order. What would be the impact on profits if Costa were to accept this special order?
Question 5
A company has $6.40 per unit in variable costs and $4.50 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.59, what price should be charged if 65,000 units are expected to be sold?
Question 6
Customer profitability analysis might result in:
dropping some customers that are unprofitable.
lowering price or offering incentives to profitable customers.
giving incentives to all customers to place orders online.
All of the above.