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# Malachite Company & American Chemical Company (ACC)

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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

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\$2.49