Johnstone Company Makes Two Products: Carpet Kleen and Floor Deodorizer

question 54

Multiple Choice

Johnstone Company makes two products: Carpet Kleen and Floor Deodorizer. Operating information from the previous year follows. $$\begin{array} { l c c } & \text { Carpet Kleen } & \text { Floor Deodorizer } \\\text { Units produced and sold } & 5,000 & 4,000 \\\text { Machine hours used } & 5,000 & 2,000 \\\text { Sales price per unit } & \$ 7 & \$ 10 \\\text { Variable cost per unit } & \$ 4 & \$ 8\end{array}$$ Fixed costs of $20,000 per year are presently allocated equally between both products. If the product mix were to change, total fixed costs would remain the same.
Assuming there is unlimited demand for both products and Johnson has 10,000 machine hours available, how many units of each product should be produced and sold? $$\begin{array} { l l l } & \text { Carpet Kleen } & \text { Floor Deodorizer } \\\text { A. } & 0 \text { units } & 0 \text { units } \\\text { B. } & 0 \text { units } & 20,000 \text { units } \\\text { C. } & 5,000 \text { units } & 10,000 \text { units } \\\text { D. } & 8,000 \text { units } & 4,000 \text { units } \\\text { E. } & 10,000 \text { units } & 0 \text { units }\end{array}$$

• A) Choice A
• B) Choice B
• C) Choice C
• D) Choice D
• E) Choice E

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Definitions:

External Auditory Canal

Short canal that opens to the exterior environment and terminates at the eardrum; part of the external ear.

Eardrum

Cellular membrane that separates the external from the middle ear; vibrates in response to sound waves; also called tympanic membrane.

Inner Ear

The innermost part of the ear, containing the cochlea, vestibule, and semicircular canals, responsible for sound detection and balance.

Organ of Hearing

The ear, particularly the inner part, which includes structures such as the cochlea that are essential for the auditory perception.