# Managerial Accounting problems

16. Yehle Inc. regularly uses material YS1E and currently has in stock 460 liters of the material for which it paid $2,530 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $4.55 per liter. New stocks of the material can be purchased on the open market for $5.45 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 720 liters of the material to be used in a job for a customer. The relevant cost of the 720 liters of material Y5IB is:

A) $3,924

B) $5,450

C) $3,510

D) $3,276

17. Kahn Company produces and sells 8,000 units of Product X each year. Each unit of Product X sells for $10 and has a contribution margin of $6. It is estimated that if Product Xis discontinued, $50,000 of the $60,000 in fixed costs charged to Product X could be eliminated. These data indicate that if Product X is discontinued, overall company net operating income should:

A) increase by $2,000 per year

B) decrease by $2,000 per year

C) increase by $38,000 per year

D) decrease by $38,000 per year

18. Jordan Company budgeted sales of 400,000 calculators at $40 per unit last year. Variable manufacturing costs were budgeted at $16 per unit, and fixed manufacturing costs at $10 per unit. A special order for 40,000 calculators at $23 each was received by Jordan in March. Jordan has sufficient plant capacity to manufacture the additional quantity without incurring any additional fixed manufacturing costs; however, the production would have to be done on an overtime basis at an estimated additional cost of $3 per calculator. Acceptance of the special order would not affect Jordan's normal sales and no selling expenses would be incurred. What would be the effect on net operating income if the special orders were accepted?

A) $120,000 decrease

B) $160,000 increase

C) $240,000 decrease

D) $280,000 increase

19. Marley Company makes three products (X, Y, & Z) with the following characteristics:

Product

xi' z

Selling price per unit $10 $15 $20

Variable cost per unit $6 $10 $10

Machine hours per unit 2 4 10

The company has a capacity of 2,000 machine hours, but there is virtually unlimited demand for each product. In order to maximize total contribution margin, how many units of each product should the company produce?

A) 2,000 units of X, 500 units of Y, and 200 units of Z

B) 0 units of X, 0 units of Y, and 200 units of Z

C) 0 units of X, 500 units of Y, and 0 units of Z

D) 1,000 units of X, 0 units of Y, and 0 units of Z

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#### Solution Preview

16. Yehle Inc. regularly uses material YS1E and currently has in stock 460 liters of the material for which it paid $2,530 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $4.55 per liter. New stocks of the material can be purchased on the open market for $5.45 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 720 liters of the material to be used in a job for a customer. The relevant cost of the 720 liters of material Y5IB is:

A) $3,924

B) $5,450

C) $3,510

D) $3,276

Answer: C

460 x $4.55 + 260 x $5.45 = $3,510

17. Kahn Company produces and sells 8,000 units of Product X each year. Each unit of Product X sells for $10 and has a contribution margin of $6. It is ...

#### Solution Summary

This solution is comprised of a detailed explanation and calculation to answer the managerial accounting problems.