Brevard Industries Produces Two Products The Company's Fixed Costs Totaled $70,000,of Which $15,000 Can Be

question 111

Multiple Choice

Brevard Industries produces two products.Information about the products is as follows:
$$\begin{array} { | l | r | r | } \hline & \text { Procuct 1 } & \text { Procuct 2 } \\\hline \text { Units produced and sold } & \$ 4,000 & 10,000 \\\hline \text { Selling price per unit } & \$ 15 & \$ 13 \\\hline \text { Variable costs per unit } & 9 & 8 \\\hline\end{array}$$
The company's fixed costs totaled $70,000,of which $15,000 can be directly traced to Product 1 and $40,000 can be directly traced to Product 2.The effect on the firm's profits if Product 2 is dropped would be a:

• A) $10,000 increase.
• B) $35,000 increase.
• C) $35,000 decrease.
• D) $10,000 decrease.

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Definitions:

Materials

The raw inputs used in the production of goods, often categorized into direct materials that can be directly traced to the final product and indirect materials used in the production process but not directly identifiable with specific units or batches of production.

Equivalent Units

A concept in cost accounting used to allocate costs to units of production in processes where the units are not yet complete, converting them into the amount of finished goods units.

Assembly Department

A section within a manufacturing process where components are joined together to form a finished product.

FIFO Method

An inventory valuation method standing for "First In, First Out," assuming that the first items purchased or produced are the first ones sold.