Quality Industries Manufactures Large Workbenches for Industrial Use The Current Cost Per Unit Is (Rounded to the Nearest

question 9

Multiple Choice

Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to protect its market share and maintain an annual sales level of 13,000 workbenches.
Cost data based on sales of 13,000 workbenches:
$\begin{array}{lccc}&\begin{array}{c}\text { Budgeted } \\\text { Quantity }\end{array} & \begin{array}{c}\text { Actual } \\\text { Quantity }\end{array} &\text { Actual Cost} \\\text { Direct materials (pounds) } & 175,000 & 168,000 & \$ 3,450,000 \\\text { Direct labor (hours) } & 72,800 & 71,500 & 825,000 \\\text { Machine setups (no. of setups) } & 900 & 880 & 250,000 \\\text { Mechanical assembly (machine hours) } & 273,000 & 281,250 & 3,750,000\end{array}$ The current cost per unit is (rounded to the nearest whole dollar) :

• A) $588.
• B) $523.
• C) $465.
• D) $637.
• E) $445.

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Definitions:

Constructive Condition

A condition inferred by law from the conduct of parties or the circumstances, rather than explicitly stated in a contract.

Materiality

A principle in accounting and law that concerns the significance of an event, fact, or item in the context of decision-making or reporting.

Forfeiture

The loss or giving up of something as a penalty for wrongdoing or breach of contract.

Reasonable Expectations

The anticipation or belief regarding a particular outcome or behavior under ordinary circumstances by a reasonable person.