Cora Corporation produces refrigerator units. The company’s normal production and sales volume of Standard units is 2,750 units per month, and units sell for $860 each. The costs of manufacturing and marketing a Standard model are as follows: Variable manufacturing cost per unit $ 230 Variable marketing cost per unit 35 Fixed product cost 275,000 Fixed period cost 220,000 The company is considering diversifying the product line to include two additional models, Economy and Deluxe, which would sell for $720 and $860 per unit, respectively. The costs of manufacturing these new models are as follows: Economy Deluxe Variable manufacturing cost 40 % below Standard $ 485 Variable marketing cost 5 % above Standard Twice Standard Total fixed product and period costs are expected to remain unchanged. Cora expects to sell 1,100 units of the Economy model and 850 units of Deluxe model per month. The company cannot expand its production capacity beyond its current level of 2,750 units. Required: 1. If Standard Model is the only product ,what would the Operating income be? 2-a. Suppose that a supplier is willing to supply 800 units of the Standard model at a price of $230 per unit. Also assume that the company can sell all that it can produce of the remaining two models. Should the offer of the supplier be accepted? multiple choice 1 Yes No

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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Cora Corporation produces refrigerator units. The company’s normal production and sales volume of Standard units is 2,750 units per month, and units sell for $860 each. The costs of manufacturing and marketing a Standard model are as follows:


Variable manufacturing cost per unit	$	230
Variable marketing cost per unit		35
Fixed product cost		275,000
Fixed period cost		220,000

The company is considering diversifying the product line to include two additional models, Economy and Deluxe, which would sell for $720 and $860 per unit, respectively. The costs of manufacturing these new models are as follows:

	Economy	Deluxe
Variable manufacturing cost		40	% below Standard	$	485
Variable marketing cost		5	% above Standard		Twice Standard

Total fixed product and period costs are expected to remain unchanged. Cora expects to sell 1,100 units of the Economy model and 850 units of Deluxe model per month. The company cannot expand its production capacity beyond its current level of 2,750 units.

Required:

1. If Standard Model is the only product ,what would the Operating income be?

2-a. Suppose that a supplier is willing to supply 800 units of the Standard model at a price of $230 per unit. Also assume that the company can sell all that it can produce of the remaining two models. Should the offer of the supplier be accepted?

multiple choice 1

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