17) Blue Technologies manufactures and sells DVD players. Great Products Company

Question

17) Blue Technologies manufactures and sells DVD players. Great Products Company has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue Technologies' normal selling price is $30 per DVD player. The total manufacturing cost per DVD player is $18 and consists of variable costs of $14 per DVD player and fixed overhead costs of $4 per DVD player. (NOTE: Assume excess capacity and no effect on regular sales.)

How much are the expected increase (decrease) in revenues and expenses from the special sales order?

25)

Select one:

a. 30.0%

b. 42.86%

27)

Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs.

If Harvey Automobiles makes the part, how much will its operating income be?

Select one:

a. $42,000 greater than if the company bought the part

b. $42,000 less than if the company bought the part

c. $78,000 greater than if the company bought the part

d. $78,000 less than if the company bought the part

28)

Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes. The cost of producing 40,000 parts is $138,000, which includes fixed costs of $68,000 and variable costs of $70,000. By outsourcing the part, the company can avoid 30% of the fixed costs.

If Cuyahoga Valley Bicycles buys the part, what is the most Cuyahoga Valley Bicycles can spend per unit so that operating income equals the operating income from making the part?

Select one:

a. $1.33

b. $2.26

c. $4.64

d. $2.33

c. 170.00%

d. 23.08%

Select one:

a. Expected increase in revenues $220,000; expected increase in expenses $140,000

b. Expected increase in revenues $220,000; expected increase in expenses $40,000

c. Expected increase in revenues $300,000; expected increase in expenses $140,000

d. Expected increase in revenues $220,000; expected increase in expenses $120,000

Explanation / Answer

The expected increase in revenues : $22 x 10,000 = 220,000

Expenses from the special sales order: (18-4*) x 10000 = 140,000

* since $4 is fixed cost and the Co. has excess capacity

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