Answer the Following Questions Using the Information Below:
Mitsufugi Company

question 101

Multiple Choice

Answer the following questions using the information below:
Mitsufugi Company makes a kitchen appliance with model number KA450.The goal for 2018 is to reduce direct materials usage per unit.No defective units are currently produced.Manufacturing conversion costs depend on production capacity defined in terms of KA450 units that can be produced.The industry market size for appliances increased 5% from 2017 to 2018.The following additional data are available for 2017 and 2018:
$$\begin{array} { l r r } & 2017 & 2018 \\\text { Units of KA450 produced and sold } & 10000 & 10300 \\\text { Selling price } & \$ 150 & \$ 145 \\\text { Direct materials (square metres) } & 30000 & 29000 \\\text { Direct material costs per square metres } & \$ 12 & \$ 13 \\\text { Manufacturing capacity for KA450 (units) } & 12500 & 12000 \\\text { Total manufacturing conversion costs } & \$ 250000 & \$ 240000 \\\text { Manufacturing conversion costs per unit of capacity } & \$ 20 & \$ 20\end{array}$$
-What is the net effect on operating profit as a result of the productivity component?

• A)Decreased operating profit due to direct material inefficiencies and capacity reduction.
• B)Increased operating profit due to direct material efficiencies only.
• C)Increased operating profit due to direct material efficiencies and capacity reduction.
• D)Decreased operating profit due to direct material inefficiencies only.

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Definitions:

Sales of Merchandise Inventory

Transactions involving the sale of goods held for resale by a business, contributing to its primary revenue.

Recording Process

The steps or procedures involved in documenting financial transactions in the accounting records.

Merchandiser's Net Income

The profit realized by a merchandising company after subtracting all of its operational expenses and cost of goods sold from its total revenue.

Key Components

Essential parts or elements that make up a larger system or process.