Topeka Company has a single product called Topek. The company normally produces and sells 80,000 Topeks each year. The company's unit costs at this level of activity are given below: Variable manufacturing cost Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $23.30 5.00 1.70 4.50 $ 34.50 One of the materials used in the production of Topeks is obtained from a foreign supplier. Civil unrest in the supplier's country has caused a cutoff in material shipments that is expected to last for one year. Topeka Company has enough material on hand to operate at 50% of normal levels for one year. As an alternative, the company could close the plant down entirely for one year. Closing the plant would reduce fixed manufacturing overhead costs by 30% and the fixed selling expenses would continue at two-thirds of their normal level during the one-year period. What is the selling price per unit of Topek that would make the company indifferent between (i) closing the plant and (ii) not closing the plant for one year? A. $25.00 В. $29.30 С. $31.00 D. $47.50 Е. None of the above

Topeka Company has a single product called Topek. The company normally produces and sells 80,000 Topeks each year. The company's unit costs at this level of activity are given below: Variable manufacturing cost Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $23.30 5.00 1.70 4.50 $ 34.50 One of the materials used in the production of Topeks is obtained from a foreign supplier. Civil unrest in the supplier's country has caused a cutoff in material shipments that is expected to last for one year. Topeka Company has enough material on hand to operate at 50% of normal levels for one year. As an alternative, the company could close the plant down entirely for one year. Closing the plant would reduce fixed manufacturing overhead costs by 30% and the fixed selling expenses would continue at two-thirds of their normal level during the one-year period. What is the selling price per unit of Topek that would make the company indifferent between (i) closing the plant and (ii) not closing the plant for one year? A. $25.00 В. $29.30 С. $31.00 D. $47.50 Е. None of the above

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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