Pillsbury Corporation Makes Two Types of Ice Cream: Chocolate and Peanut

question 5

Multiple Choice

Pillsbury Corporation makes two types of ice cream: Chocolate and Peanut Butter. Operating information from the previous year follows: $\begin{array} { l r r } & \text { Chocolate } & \text { Peanut Butter } \\\text { Units produced and sold } & 6,000 & 5,000 \\\text { Machine hours used } & 6,000 & 2,500 \\\text { Sales price per unit } & \$ 8 & \$ 11 \\\text { Variable cost per unit } & \$ 5 & \$ 9\end{array}$ Fixed costs of $30,000 per year are presently allocated equally between both products. If the product mix were to change, total fixed costs would remain the same. Assuming there is unlimited demand for both products and Pillsbury has 20,000 machine hours available, how many units of each product should be produced and sold respectively?

• A)0, 0.
• B)0, 40,000.
• C)6,000, 20,000.
• D)6,000, 40,000.
• E)20,000, 0.

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Definitions:

Transposition Error

A common accounting mistake where numbers are mistakenly reordered, leading to inaccurate data entry.

Trial Balance

A worksheet used in accounting that compiles all ledger balances into matching total amounts in debit and credit columns.

Debit Totals

An aggregate amount of all debits recorded in an accounting period, indicating resources used or expenses.

Credit Totals

The sum of all credit entries made in the accounting ledger, used in balancing the books.