Share
Explore BrainMass

Malachite Company & American Chemical Company (ACC)

Malachite Company produces a single product. The selling price is
$30 per unit, and variable costs amount to $21 per unit. Malachite's
fixed costs per month total $45,000.
1. Refer to the above information. What is the contribution margin
ratio of Malachite's product?
a. 70%.
b. 42.9%.
c. 30%.
d. 18%.
2. Refer to the above information. What is the monthly sales volume
in dollars necessary to break even?
a. $150,000.
b. $13,500.
c. $64,286.
d. $45,000.
3. Refer to the above information. How many units must be sold each
month to earn a monthly operating income of $18,000?
a. 420,000.
b. 2,000.
c. 2,100.
d. 7,000.
4. Refer to the above information. What will be the monthly margin of
safety (in dollars) if 6,000 units are sold each month?
a. $54,000.
b. $30,000.
c. $135,000.
d. $126,000.
5. Refer to the above information. What will be Malachite's monthly
operating income if 8,000 units are sold each month?
a. $90,000.
b. $72,000.
c. $195,000.
d. $27,000.
American Chemical Company (ACC) manufactures two products as part of
a joint process: A1 and B1. Joint costs up to the split-off point total
$10,000. The joint cost is allocated to A1 and B1 in proportion to their
relative sales values. At the split-off point, product A1 can be sold for
$30,000, whereas product B1 can be sold for $50,000. Product A1 can be
processed further to make product A2, at an incremental cost of $30,000.
A2 can be sold for $75,000. Product B1 can be processed further to make
product B2, at an incremental cost of $35,000. B2 can be sold for $70,000.
6. Refer to the information above. The net change in operating income
resulting from a decision to manufacture product A2 is:
a. $11,250 (increase).
b. $11,250 (decrease).
c. $15,000 (decrease).
d. $18,750 (increase).
7. Refer to the information above. The net change in operating income
resulting from a decision to manufacture product B2 is:
a. $16,250 (decrease).
b. $10,000 (decrease).
c. $3,750 (decrease).
d. $3,750 (increase).

Solution Preview

Malachite Company produces a single product. The selling price is
$30 per unit, and variable costs amount to $21 per unit. Malachite's
fixed costs per month total $45,000.
1. Refer to the above information. What is the contribution margin
ratio of Malachite's product?
c. 30%.
=(30-21)/30

2. Refer to the above information. What is the monthly sales volume
in dollars necessary to break even?
a. $150,000.
=$45000/30%

3. Refer to the above information. How many units must be sold each
month to earn a monthly operating income of $18,000?
d. 7,000.

=(45000+18000)/9

4. Refer to the above information. What will be the monthly margin of
safety (in dollars) if 6,000 units ...

Solution Summary

You will find the answer to these puzzling questions inside.

$2.19