1. A company expects to produce and sell 8000 units of a single product. Manag

1. A company expects to produce and sell 8000 units of a single product. Management desires a 20% return on assets of $1520000. The following additional
company information is available:

Variable Cost (per Unit)

Production costs $78

Nonproduction costs $22

Fixed costs (in total)

Overhead $110000

Nonproduction $40000

Compute markup per unit. Assume that markup percentage equals desired profit divided by total costs

(A)$91.75

(B)$38.00

(C)$100.00

(D)$156.75

(E)$118.75

2. A company expects to produce and sell 9000 units of a single product. Management desires an 18% return on assets of $1750000. The following additional
company information is available:

Variable Cost (per Unit)

Production costs $79

Nonproduction costs $5

Fixed costs (in total)

Overhead $279000

Nonproduction $90000

Compute markup per unit. Assume that markup percentage equals desired profit divided by total costs.

(A)$125

(B)$160

(C)$110

(D)$84
(E)$35

3. Paz Inc. manufactures a product which contains a small motor. The company has always purchased this motor from a supplier for $55 each. Paz recently
upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the motor instead of buying
it. The company prepared the following per unit cost projections of making the motor assuming that overhead is allocated to the part at the normal
predetermined overhead rate of 150% of direct labor cost.

Direct Materials $16

Direct labor 20

Overhead (fixed and variable) 30

Total $66

The required volume of output to produce the motors will not require any incremental fixed overhead. Incremental variable overhead cost is $21 per motor. What
is the effect on income if Paz decides to make the motors?

Income will increase by $19 per unit.

4. A company has the choice of either selling 750 defective units as scrap or rebuilding them. They have already spent $14 per unit making these items. The
company could sell the defective units as they are for $8.00 per unit. Alternatively the company could rebuild the units at an incremental cost of $1.00 per
unit. If it rebuilds the units they will not be able to produce 750 new units with a unit cost of $3.00 and a normal selling price of $15.00 each. What should
the company do?