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Table 5.1 A Company Makes Four Products That Have the Following Characteristics

question 100

Multiple Choice

Table 5.1
A company makes four products that have the following characteristics: Product A sells for $50 but needs $10 of materials and $15 of labor to produce; Product B sells for $75 but needs $30 of materials and $15 of labor to produce; Product C sells for $100 but needs $50 of materials and $30 of labor to produce; Product D sells for $150 but needs $75 of materials and $40 of labor to produce. The processing requirements for each product on each of the four machines are shown in the table.

Work centers W, X, Y, and Z are available for 40 hours per week and have no setup time when switching between products. Market demand for each product is 80 units per week. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 5.1. Using the traditional method, what is the optimal product mix (consider variable costs only-overhead is not included in this profit calculation) ?

Grasp the essential features and limitations of activity-based costing (ABC) and other overhead application methods.

Comprehend the significance of selecting appropriate cost drivers for accurate product cost calculation.

Understand the basics and relevance of cost allocation methods in accounting.

Identify and apply the sequential method for cost allocation.

Definitions:

Civilian Population

Non-military individuals and communities who are generally considered to be outside of the combatant categories during times of war or conflict.

General Sherman

refers to William Tecumseh Sherman, a Union general during the American Civil War, known for his "March to the Sea" campaign, which aimed to demoralize the South.

Atlanta

A major city in Georgia, known for its significant role in both the Civil War and the civil rights movement.

Mississippi River

One of the largest rivers in the United States, flowing south from Minnesota to the Gulf of Mexico, and playing a significant role in the country’s commerce and ecology.