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Account Solution

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Submitted By affanali1
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Relevant Costing - Solutions 1. Ans: A Solution: | Opportunity cost of sales foregone if special project is undertaken ($8.35 × 240) | $2,004 | | Less: delivery cost | 71 | | Relevant cost of 240 kilograms of raw material | $1,933 | 2. Ans: C

Solution: Demand for wood carvers: | | Letter Openers | Elvis Statues | Candle Holders | | Labor-hours per unit | 1 | 6 | 2 | | Monthly demand in units | 800 | 800 | 800 | | Total hours required | 800 | 4,800 | 1,600 |

Total time required for all products: 7,200

Optimal production plan: | | Letter Openers | Elvis Statues | Candle Holders | | Selling price per unit | $30.00 | $80.00 | $42.00 | | Variable cost per unit | $20.00 | $40.00 | $20.00 | | Contribution margin per unit | $10.00 | $40.00 | $22.00 | | Labor-hours per unit | 1 | 6 | 2 | | Contribution margin per hour | $10.00 | $6.67 | $11.00 | | | | | | | Rank in terms of profitability | 2 | 3 | 1 | | | | | | | Optimal production | 200 | 0 | 800 |

| Total hours available | 1,800 | | Less: hours required for 800 Candle Holders (800 × 2) | 1,600 | | Hours remaining | 200 | | Divided by hours required per Letter Opener | ÷ 1 | | Number of Letter Openers to produce | 200 |

| Maximum contribution margin: | | | Candle Holders (800 × $22) | $17,600 | | Letter Openers (200 × $10) | 2,000 | | Maximum contribution margin | $19,600 | 3. Ans: C Solution: Total rental income = $1,000 + $1,210 + $2,347 + $1,878 + $1,065 = $7,500

| | U | V | W | X | Y | | Rental income | $1,000 | $1,210 | $2,347 | $1,878 | $1,065 | | Less expenses | 800 | 1,300 | 2,600 | 2,400 | 1,300 | | Add back proportional share of common expenses [(Rental income in each

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