Table 5.3 King Supply Makes Four Different Types of Plumbing Fixtures: W

question 113

Multiple Choice

Table 5.3
King Supply makes four different types of plumbing fixtures: W, X, Y and Z. The contribution margins for these products are: $70 for Product W, $60 for Product X, $90 for Product Y and $100 for Product Z. Fixed overhead is estimated at $5,500 per week. The manufacture of each fixture requires four machines, Machines #1, 2, 3 and 4. Each of the machines is available for 40 hours a week and there is no setup time required when shifting from the production of one product to any other. The processing requirements to make one unit of each product are shown in the table. Weekly product demand for the next planning period has been forecasted as follows: 70 Ws, 60 Xs, 50 Ys and 30 Zs.

In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 5.3. Using the bottleneck method, what is the profit if Burdell manufactures the optimal product mix?

• A) less than or equal to $10,000
• B) greater than $10,000 but less than or equal to $11,000
• C) greater than $11,000 but less than or equal to $12,000
• D) greater than $12,000

Identify conditions for accrual of vacation pay under GAAP.

Compute interest expense and net carrying value for non-interest-bearing notes.

Determine bonus compensation expenses under specific conditions.

Compare the use and significance of quick and current ratios for liquidity analysis.

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Definitions:

Capital Budgeting

The process by which a business evaluates and plans for significant investments in projects, properties, or equipment.

Expected Cash Flows

Forecasts of the amounts, timing, and uncertainty of cash receipts and disbursements that a business anticipates.

Annual Rate of Return Technique

A method to estimate the profitability of potential investments by calculating the projected annual rate of return.

Time Value of Money

The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.