Smith Manufacturing has 27,000 labor hours available for producing X and Y. Cons

Question

Smith Manufacturing has 27,000 labor hours available for producing X and Y. Consider the following information:
Product A Product B
Required labor time per unit (hours) 2 3
Maximum demand (units) 6,000 8,000
Contribution margin per unit $5.00 $6.00
Contribution margin per labor hour $2.50 $2.00

If Smith follows proper managerial accounting practices, which of the following production schedules should the company set?
Product A Product B
A. 0 units 8,000 units
B. 1,500 units 8,000 units
C. 6,000 units 0 units
D. 6,000 units 5,000 units
E. 6,000 units 8,000 units

A. Option A
B. Option B
C. Option C
D. Option D
E. Option E

also

The following costs are relevant to the decision situation cited except:
A. the cost of hiring a full-time staff attorney, in a decision to establish an in-house legal department or retain the services of a prominent law firm.
B. the remodeling cost of existing office space, in a firm's decision to stay at its current location or move to a new building.
C. the long-term salary costs demanded by Joe Torrez (a superstar) and Rip Moran (an average player) in baseball contract negotiations, in a decision that determines the amounts by which ticket prices must be raised.
D. the cost to enhance an airline's Web site, in a decision to expand existing service to either Salt Lake City or Phoenix.
E. the commissions that could be earned by a salesperson, in a decision that involves salesperson compensation methods (i.e., commissions or flat monthly salaries).

Explanation / Answer

If Smith follows proper managerial accounting practices, which of the following production schedules should the company set? Product A Product B D. 6,000 units 5,000 units D. Option D also The following costs are relevant to the decision situation cited except: D. the cost to enhance an airline's Web site, in a decision to expand existing service to either Salt Lake City or Phoenix.

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