1. Blanchard Company manufactures and sells dresses at a variable cost of $30 each and a fixed cost of x. It can sell 6,000 dresses at a selling price of $50 to earn an operating income of $20,000 or it can sell 3,500 dresses at a selling price of $60 and another 2,000 dresses at a selling price of $40. Which alternative should Blanchard choose?

2. Canta Corporation manufactures and sells a special kind of ball bearing. Its cost structure depends on the number of bearings it produces. Its fixed costs and variable manufacturing cost per unit for different ranges of production are described in the following table:

Canta’s sales director believes the company can sell 2,500 units at a selling price of $300; or 5,000 units at a price of $200; or 8,000 units at a price of $175. If it chose to sell 8,000 units, however, it would incur additional advertising costs of $50,000 and variable selling costs of $5 per unit.

Required
Should Canta Corporation plan to produce and sell (a) 2,500 units (b) 5,000 units or (c) 8,000 units?

Transcribed Image Text:

Production Range in Units 1-3,000 3,001-6000 6,001-10,000 Fixed Costs $250,000 $350,000 $750,000 Variable Manufacturing Cost per Unit $75 $50 $25