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    Production Cost and Supply Chain

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    (TCO B)
    Evergreen Corp. has provided the following data:
    Sales per period 1,000 units
    Selling price $40 per unit
    Variable manufacturing cost $12 per unit
    Selling expenses $5,100 plus 5% of selling price
    Administrative expenses $3,000 plus 20% of selling price

    The number of units needed to achieve a target net operating income of $49,500 would be:
    1,238 Units
    2,750 Units
    3,200 Units
    2,057 Units

    2. All other things the same, which of the following would be true of the contribution margin and variable expenses of a capital-intensive company with fixed costs and low variable costs as compared to a labor-intensive company with low fixed costs and high variable costs? (Points: 8)
    Contribution Margin - Higher, Variable Costs - Higher
    Contribution Margin - Lower, Variable Costs - Higher
    Contribution Margin - Higher, Variable Costs - Lower
    Contribution Margin - Lower, Variable Costs - Lower

    3. (TCO B) Garth Company sells a single product. If the selling price per unit and the variable expense per unit both increase by 10% and fixed expenses do not change, then: (Points: 8)
    Contribution Margin Per Unit - Increases, Contribution Margin Ratio - Increases, Break-Even in Units - Decreases
    Contribution Margin Per Unit - No Change, Contribution Margin Ratio - No Change, Break-Even in Units - No Change
    Contribution Margin Per Unit - No Change, Contribution Margin Ratio - Increases, Break-Even in Units - No Change
    Contribution Margin Per Unit - Increases, Contribution Margin Ratio -No Change, Break-Even in Units - Decreases

    4. (TCO B) Korn Company sells two products, as follows:
    Selling price Variable expense
    per unit per unit
    Product Y $120 $ 70
    Product Z 500 200
    Fixed expenses total $300,000 annually. The expected sales mix in units is 60% for product Y and 40% for product Z. How much is Korn's expected break-even sales in dollars?

    $300,000
    $420,000
    $475,000
    $544,0001. (TCO B)

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    https://brainmass.com/business/accounting/production-cost-and-supply-chain-93628

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    Hello!
    Here are your answers.

    Question 1 - Correct answer is D
    Let's call X to the number of units sold. We get the following relationship:

    Op. Inc. = (40 - 12)X - 5100 - 0.05*40X - 3000 - 0.20*40X
    (as you can see, it's just Total Revenues minus Total Costs)

    Since we want the Operating Income to be $49,500, we simply solve the equation:

    49500 = (40 - 12)X - 5100 - 0.05*40X - 3000 - 0.20*40X
    49500 = 38X - 5100 - 2X - 3000 - 8X
    49500 = 28X - 8100
    X = 2,057.14...

    Therefore, 2,057 units are needed.

    Question 2 - Correct Answer is C
    Clearly, variable costs are lower in a capital-intensive firm than in a labor-intensive firm, as a capital-intensive firm ...

    Solution Summary

    This solution contains step-by-step calculations to determine the variables of the production cost and supply chain scenarios using concepts of operating income, capital-intensive firm vs. labor-intensive firm, contribution margin, fixed expenses, and breakeven point.

    $2.19

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