60.1K

Verified Solution

Link Copied!

1.

Liu, Inc. creates DVDs for major film companies. Over the past two years, Liu has only used one machine to burn the DVDs. This machine had the capacity to burn 40,000 DVDs per month. This year Liu purchased a brand new machine for burning the DVDs that had a capacity of 60,000 DVDs per month and a cost of $150,000. He estimates the machine has a useful life of five years. Before production of DVDs, Liu purchases blank DVDs from a domestic supplier at a cost of $0.15 / DVD. The manufacturing process requires two line workers; one to run the machine and one to package the DVDs. These employees are paid $0.05 / DVD produced. Cost of packaging is $0.45 / DVD. Additionally, Liu hired a production supervisor and is paying her $ 45,000 / year in salary and pays $ 7,000 / year in insurance. This year Liu estimates he will produce and sell a total of 1,000,000 DVDs (sales price = $2 / DVD). Which one of the following is NOT a variable cost?

a. Cost of packaging

b. Salary of production supervisor

c. Cost of blank DVDs

d. Wages paid to line workers

2.

Liu, Inc. creates DVDs for major film companies. Over the past two years, Liu has only used one machine to burn the DVDs. This machine had the capacity to burn 40,000 DVDs per month. This year Liu purchased a brand new machine for burning the DVDs that had a capacity of 60,000 DVDs per month and a cost of $150,000. He estimates the machine has a useful life of five years. Before production of DVDs, Liu purchases blank DVDs from a domestic supplier at a cost of $0.15 / DVD. The manufacturing process requires two line workers; one to run the machine and one to package the DVDs. These employees are paid $0.05 / DVD produced. Cost of packaging is $0.45 / DVD. Additionally, Liu hired a production supervisor and is paying her $ 45,000 / year in salary and pays $ 7,000 / year in insurance. This year Liu estimates he will produce and sell a total of 1,000,000 DVDs (sales price = $2 / DVD). If Liu exceeds his goal of producing 1,000,000 DVDs this year, the variables costs will:

a. Remain constant on a per unit basis

b. Decrease on a per unit basis

c. Increase on a per unit basis

d. Decrease in the aggregate

3.

Liu, Inc. creates DVDs for major film companies. Over the past two years, Liu has only used one machine to burn the DVDs. This machine had the capacity to burn 40,000 DVDs per month. This year Liu purchased a brand new machine for burning the DVDs that had a capacity of 60,000 DVDs per month and a cost of $150,000. He estimates the machine has a useful life of five years. Before production of DVDs, Liu purchases blank DVDs from a domestic supplier at a cost of $0.15 / DVD. The manufacturing process requires two line workers; one to run the machine and one to package the DVDs. These employees are paid $0.05 / DVD produced. Cost of packaging is $0.45 / DVD. Additionally, Liu hired a production supervisor and is paying her $ 45,000 / year in salary and pays $ 7,000 / year in insurance. This year Liu estimates he will produce and sell a total of 1,000,000 DVDs (sales price = $2 / DVD). The relevant range of the two production machines is:

a. Less than estimated production

b. More than estimated production

c. The same as estimated production

d. Not able to be determined

4.

Liu, Inc. creates DVDs for major film companies. Over the past two years, Liu has only used one machine to burn the DVDs. This machine had the capacity to burn 40,000 DVDs per month. This year Liu purchased a brand new machine for burning the DVDs that had a capacity of 60,000 DVDs per month and a cost of $150,000. He estimates the machine has a useful life of five years. Before production of DVDs, Liu purchases blank DVDs from a domestic supplier at a cost of $0.15 / DVD. The manufacturing process requires two line workers; one to run the machine and one to package the DVDs. These employees are paid $0.05 / DVD produced. Cost of packaging is $0.45 / DVD. Additionally, Liu hired a production supervisor and is paying her $ 45,000 / year in salary and pays $ 7,000 / year in insurance. This year Liu estimates he will produce and sell a total of 1,000,000 DVDs (sales price = $2 / DVD). If Liu exceeds his goal by producing 1,100,000 DVDs this year, the fixed costs will:

a. Remain constant on a per unit basis

b. Decrease on a per unit basis

c. Increase on a per unit basis

d. Decrease in the aggregate

5.

Liu, Inc. creates DVDs for major film companies. Over the past two years, Liu has only used one machine to burn the DVDs. This machine had the capacity to burn 40,000 DVDs per month. This year Liu purchased a brand new machine for burning the DVDs that had a capacity of 60,000 DVDs per month and a cost of $150,000. He estimates the machine has a useful life of five years. Before production of DVDs, Liu purchases blank DVDs from a domestic supplier at a cost of $0.15 / DVD. The manufacturing process requires two line workers; one to run the machine and one to package the DVDs. These employees are paid $0.05 / DVD produced. Cost of packaging is $0.45 / DVD. Additionally, Liu hired a production supervisor and is paying her $ 45,000 / year in salary and pays $ 7,000 / year in insurance. This year Liu estimates he will produce and sell a total of 1,000,000 DVDs (sales price = $2 / DVD). Within the relevant range, the difference between variable costs and fixed costs is:

a. Variable costs per unit fluctuate and fixed costs per unit remain constant.

b. Variable costs per unit are constant and fixed costs per unit fluctuate.

c. Both total variable costs and total fixed costs are constant.

d. Both total variable costs and total fixed costs fluctuate.

6.

Liu, Inc. creates DVDs for major film companies. Over the past two years, Liu has only used one machine to burn the DVDs. This machine had the capacity to burn 40,000 DVDs per month. This year Liu purchased a brand new machine for burning the DVDs that had a capacity of 60,000 DVDs per month and a cost of $150,000. He estimates the machine has a useful life of five years. Before production of DVDs, Liu purchases blank DVDs from a domestic supplier at a cost of $0.15 / DVD. The manufacturing process requires two line workers; one to run the machine and one to package the DVDs. These employees are paid $0.05 / DVD produced. Cost of packaging is $0.45 / DVD. Additionally, Liu hired a production supervisor and is paying her $ 45,000 / year in salary and pays $ 7,000 / year in insurance. This year Liu estimates he will produce and sell a total of 1,000,000 DVDs (sales price = $2 / DVD). What is Lius contribution margin per DVD?

a. $ 1.10 / DVD

b. $ 1.25 / DVD

c. $ 1.30 / DVD

d. $ 1.35 / DVD

Answer & Explanation Solved by verified expert

See Answer