A Company Has the Cost Structure Shown in the Table

question 13

Multiple Choice

A company has the cost structure shown in the table and faces a demand in July that exceeds capacity by 200 units. They enter June with an inventory of zero and a demand equal to capacity. Their best course of action in order to completely fill all of the orders for both June and July by the end of July is to: $$\begin{array} { | l | c | } \hline { \text { Managerial Lever } } & \text { Cost } \\\hline \text { Regular production } & \$ 1,000 / \text { unit } \\\hline \text { Overtime production } & \$ 1,300 / \text { unit } \\\hline \text { Subcontracting } & \$ 1,200 / \text { unit } \\\hline \text { Inventory holding } & \$ 100 / \text { unit/month } \\\hline \text { Backlog cost } & \$ 400 / \text { unit/month } \\\hline\end{array}$$

• A)subcontract 200 units in June and use 100% of their regular capacity in both June and July.
• B)subcontract 100 units in both June and July and use 100% of their regular capacity in both June and July.
• C)produce 200 units using overtime in July and use 100% of their regular capacity in both June and July.
• D)subcontract 200 units in July and use 100% of their regular capacity in both June and July.

Record the conversion of accounts payable to notes payable through journal entries.

Understand and apply the concept of time value of money in calculating total payment upon note maturation.

Identify employer responsibilities for payroll taxes including FICA, FUTA, and SUTA.

Classify salaries and wages as either current liabilities or expenses and record them accordingly.

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Definitions:

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