Computer Peripherals makes scanners and printers. Its income statement for last year was as follows:

Scanners Printers Total Units sold 5,000 10,000 15,000 Selling price per unit $ 120 $ 75

Sales revenue $600,000 $750,000 $1,350,000

Direct materials $200,000 $150,000 Direct labour 40,000 50,000 Production overhead 200,000 250,000 Administrative & selling overhead

50,000 100,000

Total $490,000 $550,000 $1,040,000

Product profit $110,000 $200,000 $ 310,000

1. You are told that the materials and labour costs are variable expense, and production overhead and the selling & administrative overhead are all fixed expense. Production overhead has been allocated to products on the basis of $5 of production overhead for each $1 of labour cost. Administrative & selling expense is allocated to products in proportion to sales units. The variable cost per unit for scanners is _______________.

a. $120

b. $98

c. $58

d. $48

e. none of the above

2. The full (total) cost per unit for a printer is _______________.

a. $55 b.$25 c. $20 d.$15 e. none of the above

3. Georgina Township has requested that Computer Peripherals supply it with 1,000 each of scanners and printers, at, respectively, $90 and $60. The additional production is not within the existing capacity, so if Computer Peripherals accept the contract, it would lose an equal number of sales to its regular customers. Computer Peripherals should _______________.

a . accept the contract as it provides positive contribution margin

b. accept the contract as it is for a significant number of units

c. reject the contract as it does not cover full (total) cost

d. reject the contract because the price does not equal the normal selling price

e. none of the above

Georgina Township has requested that Computer Peripherals supply it with 1,000 each of scanners and printers, at, respectively, $90 and $60. The additional production is within the existing capacity. If Computer Peripherals accept the contract, its operating profit will _______________.

a, decrease by $60,000

b. decrease by $3,000

c. increase by $68,000

d. increase by $82,000

e. none of the above

d. 1000*(90-48) + 1000*(60-20)

4. Computer Peripherals is concerned that it does not make enough profit on scanners, compared to printers. It is considering closing down the scanner line. If it did so, all fixed costs will remain the same in total and the sale of printers would double from 10,000 units to 20,000 units. Operating profit would be _______________.

a. $500,000

b. $400,000

c. $310,000

d. $300,000

e. none of the above

a. 20000* (75-20)-600K = $500K versus now 1.35MM-440K-600K = 310K