Section VI Please answer the following questions. a. Lattimer Company had the following results of operations for the past year: Sales (15,000 units at $12) $180,000 Variable manufacturing costs $97,500 Fixed manufacturing costs 21,000 Selling and administrative expenses (all fixed) 36,000 (154,500) Operating income $25,500 A foreign company whose sales will not affect Lattimer’s market offers to buy 5,000 units at $7.50 per unit. In addition to existing costs, selling these units would add a $0.25 selling cost for export fees. If Lattimer accepts this additional business, the special order will yield a: $2,000 loss. $8,250 loss. $3,750 profit. $3,250 loss. $5,000 profit. b. 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). $9,500. $2,500. c. 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. The incremental income or loss on reworking the units is: $20,000 loss. $20,000 income. $12,000 loss. $32,000 income. $30,000 income. d. 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.

    General guidance

    Concepts and reason

    Variable requireing: Ininvariable requireing is undivided of the requireing methods that place only ininvariable requires to the schedule of the effect. The transmute in raze of output achieve purpose transmute in ininvariable requires. This is too known as direct requireing. It is divergent from aridity requireing, where the fixed requires are too bewildered to the individuals as per their performance. Fundamentals

    Variable require: This require is established on the raze of effection. Total ininvariable costs transmutes with the transmute in the enumerate of individuals of effection barring ininvariable require per individual trash invariable. It is quickly proportional to the enumerate of issue produced and sold. It is deducted from the sales to arrive at the aid.

    Incremental Pay: The acception in pay with regard to the affixed enumerate of individuals among abandoned period of spell is termed as incremental pay. The incremental pay is the object product of sales appraise near affixed require to rework and opportunity pay past.

    Reworking requires: Requires incurred to improve or to rework the short individuals producting in an acception of pay to the troop.