# Ch10 1) Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit? Total cost times markup percentage. Total cost per unit times markup percentage per unit. Total cost per unit divided by markup percentage per unit. Markup percentage per unit divided by total cost per unit. Markup percentage divided by total cost. 2) Ahngram Corp. has 1,000 defective units of a product that cost \$3 per unit in direct costs and \$6.50 per unit in indirect cost when produced last year. The units can be sold as scrap for \$4 per unit or reworked at an additional cost of \$2.50 and sold at full price of \$12. The incremental net income (loss) from the choice of reworking the units would be: \$5,500. \$0. (\$2,500). \$10,500. \$2,500. 3) Chang Industries has 2,000 defective units of product that have already cost \$14 each to produce. A salvage company will purchase the defective units as they are for \$5 each. Chang’s production manager reports that the defects can be corrected for \$6 per unit, enabling them to be sold at their regular market price of \$21. Chang should: Throw the units away. Sell the units to the salvage company for \$5 per unit. Sell the units as they are because repairing them will cause their total cost to exceed their selling price. Sell 1,000 units to the salvage company and repair the remainder. Correct the defects and sell the units at the regular price. 4) Gordon Corporation inadvertently produced 10,000 defective digital watches. The watches cost \$8 each to produce. A salvage company will purchase the defective units as they are for \$3 each. Gordon’s production manager reports that the defects can be corrected for \$5 per unit, enabling them to be sold at their regular market price of \$12.50. Gordon should: Sell the watches for \$3 per unit. Correct the defects and sell the watches at the regular price. Sell the watches as they are because repairing them will cause their total cost to exceed their selling price. Sell 5,000 watches to the salvage company and repair the remainder. Throw the watches away. 5) Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of \$42,000. The division sales for the year were \$960,000 and the variable costs were \$475,000. The fixed costs of the division were \$527,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield’s operating income for eliminating this business segment would be: \$485,000 decrease \$210,800 increase \$274,200 decrease \$485,000 increase \$274,200 increase

## General guidance

Concepts and reason

Costing: It can be referred as class of require of a work or benefit. It is a capacious expression which includes guiding of requires other than only cautious the requires.

Pricing: Pricing is the process by which a occupation sets up the expense of its work, proviso or benefit to be rendered. It is undivided of the momentous firmness as the expense at which the work is sold or benefits are offered determines the revenue coercion the being and hereafter the use. Fundamentals

Cost: The concept of require in conduct accounting refers to the totality paid or totality sacrificed to get triton. The esteem of entire requires achieve enjoy to be fast in monetary esteems. There are multitudinous types of requires in require accounting. Therefore, identification of the requires is a significant undertaking in firmness making.