Answer the Following Questions Using the Information Below:
Crynton Company

question 160

Multiple Choice

Answer the following questions using the information below:
Crynton Company makes a household appliance with model number L800. The goal for 2015 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 L800 units that can be produced. The industry market size for appliances increased 5% from 2014 to 2015. The following additional data are available for 2014 and 2015:
$\begin{array}{lrr}&2014&2015\\\text { Units of L800 produced and sold } & 30,000 & 31,500 \\\text { Selling price } & \$ 300 & \$ 285 \\\text { Direct materials (square feet) } & 90,000 & 87,000 \\\text { Direct material costs per square foot } & \$ 30 & \$ 33\\\text { Manufacturing capacity for L800 (units) } & 37,500 & 36,000 \\\text { Total conversion costs } & \$ 750,000 & \$ 720,000 \\\text { Conversion costs per unit of capacity } & \$ 60 & \$ 60\end{array}$
-Overall,was Crynton's strategy successful in 2015?

• A) Yes, because total revenues increased
• B) No, because operating income decreased
• C) No, because direct materials usage per unit increased
• D) No, because direct material cost per unit decreased

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Definitions:

F.O.B. Contract

A shipping agreement where "Free On Board" determines that the seller delivers goods on board a vessel designated by the buyer, transferring the risk from the seller to the buyer once the goods are onboard.

C.O.D. Contract

Contract of "Cash On Delivery" where payment for goods is made at the time of delivery rather than in advance.

Privity of Contract

A legal concept that restricts the parties who can sue or be sued under a contract to those who are a part of the contract agreement.

Consumer Transactions

Business dealings or trade between sellers and individuals who are purchasing for personal, family, or household use.