Watson Corporation Manufactures Two Products,Simple and Complex

question 93

Multiple Choice

Watson Corporation manufactures two products,Simple and Complex.The following annual information was gathered: Total annual fixed costs are $18,000.Assume Watson Corporation can produce and sell any mix of Simple or Complex at full capacity.It takes one hour to make one unit of Complex.However,Simple takes 50% longer to manufacture when compared to Complex.Only 120,000 hours of plant capacity are available.How many units of Simple and Complex should Watson Corporation produce and sell in a year to maximize profits?

• A)an equal number of Simple and Complex
• B)80,000 units of Simple and 0 units of Complex
• C)0 units of Simple and 120,000 units of Complex
• D)either Simple or Complex; it does not matter

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Definitions:

Comprehensive Income

Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

GAAP

Generally Accepted Accounting Principles, a set of accounting standards and procedures used in the United States to prepare and present financial statements in a consistent manner.

Financial Statements

Comprehensive reports that provide information about a company's financial performance and position, including its income statement, balance sheet, statement of cash flows, and statement of shareholder equity.

Other Comprehensive Income

A financial accounting term representing the revenues, expenses, gains, and losses that are not included in net income, affecting the equity section of the balance sheet outside of net income.