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A.) Brown Corporation makes four products in a single facility. These products have the following unit product costs: Products A B C D Direct materials

A.)

Brown Corporation makes four products in a single facility. These products have the following unit product costs:

Products

A B C D
Direct materials $15.80 $19.70 $12.70 $15.40
Direct labor 17.80 21.20 15.60 9.60
Variable manufacturing overhead 4.60 5.80 8.30 5.30
Fixed manufacturing overhead

27.70

14.60

14.70

16.70

Unit product cost

$65.90

$61.30

$51.30

$47.00

Additional data concerning these products are listed below.

Products

A B C D
Grinding minutes per unit 2.10 1.20 0.80 0.40
Selling price per unit $79.70 $72.10 $68.90 $63.60
Variable selling cost per unit $2.80 $3.30 $3.00 $3.70
Monthly demand in units 3,200 2,200 2,200 4,200.00

The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines. Direct labor is a variable cost in this company.

Which product makes the MOST profitable use of the grinding machines?

Product B

Product A

Product C

Product D

B.)

(Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $34,000 and will have a 6-year useful life and a $4,600 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $32,600 per year. The cost of these prescriptions to the pharmacy will be about $26,200 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is closest to:

5.3 years

4.6 years

6 years

4.1 years

C.)

(Ignore income taxes in this problem.) The Zinger Corporation is considering an investment that has the following data:

Year 1 Year 2 Year 3 Year 4 Year 5
Investment $12,500 $3,900
Cash inflow $2,900 $2,900 $9,500 $4,900 $4,900

Cash inflows occur evenly throughout the year. The payback period for this investment is: (Round your answer to 1 decimal place)

3 years

3.2 years

4 years

4.2 years

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