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BEC questions: Bartlett Company, Kern Co., and Ordering Cost

1. Bartlett Company is considering a new product, Pear. Bartlett's fixed costs are $200,000. Pear's contribution margin is $200 per unit. Bartlett has a marginal tax rate of 25%. How many units of Pear would Bartlett have to sell to have after-tax net income of $1,000,000?

a. 2,250 units
b. 4,750 units
c. 5,000 units
d. 7,667 units

2.During May, Kern Co. produced and sold 10,000 units of a product. Manufacturing and selling costs incurred during May were as follows:
Direct materials and direct labor $200,000
Variable manufacturing overhead $45,000
Fixed manufacturing overhead $10,000
Variable selling costs $5,000
The product's unit cost under direct (variable) costing was

a. $24.50
b. $25.00
c. $25.50
d. $26.00

3.What costs are included in ordering costs in the economic order quantity model?

a. Handling
b. Insurance
c. Interest on invested capital
d. Quantity discounts lost.

Solution Summary

The attached MS Excel spreadsheet contains detailed illustrations for the calculation of after-tax income from contribution margin and marginal tax rate data, the determination of unit cost under direct (variable) cost information, and ordering costs in the economic order quantity model.