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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).

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    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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