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# . FARMLAND INC. PRODUCES 80,000 UNITS OF PRODUCT A AT A TOTAL COST OF \$2.4 MILLION.

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. Farmland Inc. produces 80,000 units of product A at a total cost of \$2.4 million. Totalfixed costs are \$1.4 million. If the company increases production by 25% and uses a40% markup the price per unit will be:A) \$31.54B) \$30.80C) \$51.80D) \$37.10Use the following to answer questions 2-3:TXU Company's market for the Model 55 has changed significantly, and TXU has had to dropthe price per unit from \$225 to \$165. There are some units in the work in process inventory thathave costs of \$200 per unit associated with them. TXU could sell these units in their currentstate for \$150 each. It will cost TXU \$50 per unit to complete these units so that they can besold for \$165 each.2. A new employee looks at the analysis and exclaims, “We'll lose money with either ofthese alternatives! Let's just throw these units in the trash!” Suppose the alternative totrashing is choosing the more profitable of the two alternatives (that the new employeelooked at and did not like). What effect will the trashing option (that the new employeewants) have on net income?A) Net income will increase by \$35 per unit for each unit discarded.B) Net income will decrease by \$150 per unit for each unit discarded.C) It will have no effect on net income.D) Net income will decrease by \$265 per unit for each unit discarded.13. When the incremental revenues and expenses are analyzed, the company is better off byA) \$10 per unit if they sell the units in their current state.B) \$35 per unit if they sell the units in their current state.C) \$15 per unit if they complete the units.D) \$125 per unit if they complete the units.4. A company using activity based pricing marks up the direct cost of goods by 43% pluscharges customers for indirect costs based on the activities utilized by the customer.Indirect costs are charged as follows: \$8.00 per order placed; \$4.00 per separate itemordered; \$30.00 per return. A customer places 10 orders with a total direct cost of\$3,000, orders 300 separate items, and makes 6 returns. What will the customer becharged?A) \$5,330B) \$3,000C) \$5,750D) \$4,2905. Manufacturing overhead is allocated to products based on the number of machine hoursrequired. In a year when 20,000 machine hours were anticipated, costs were budgetedat \$125,000. If a product requires 7,000 machine hours, how much manufacturingoverhead will be allocated to this product?A) \$41,667B) \$43,750C) \$44,120D) \$50,000Use the following to answer questions 6-7:The Sunderland Hotel has 200 rooms. Each room rents at \$110 per night and variable costs total\$16 per room per night of occupancy. Fixed costs total \$84,000 per month.6. If Sunderland spends an additional \$10,000 in the month of February on advertisingthey feel that they can expect occupancy rate to increase by 5%. What would be thefinancial impact of spending this additional money on advertising for the month ofFebruary (28 days)?A) Total fixed costs will increase by \$10,500.B) Net income will increase by \$16,320.C) Net income will increase by \$26,320.D) Total fixed costs will remain the same.7. If 80% of the rooms are occupied each night in the month of February (28 days) whatwill total costs be for the month?A) \$132,560.B) \$173,600.C) \$143,680.D) \$155,680.

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