CORRECT TEXT - (Topic 2)
Assuming mere are no other imitations, should AMI accept the one-time order from a financial perspective? Explain your answer
Essay
Apex Manufacturing lnc. (AMI) is a Canada-based company that manufactures a manufactures and unique part for aircrafts. It has few competitors in the market. The company is exposed to exchange rate risk because about 90% of its products are exported to the U.S, and most of its sales contracts are in U.S. dollars. AMI has the capacity to manufacture 1,500 units of the part per year. For the year just ended. AMI manufactured and sold 1,000 units. The operating results are shown below.
Recently, A new customer made a one-area order of 500 units of the part at $1.200 per unit. The CTO asked the controller to analyze this offer. AMI is considering adjusting its sales price next year in a recent meeting, the CFO suggested to use the market-based approach for pricing decisions, bat the controller insisted that the cost-based approach is more favorable to the company.
Solution:
As the price offered is $1200 which is greater than the contribution per unit of $1000, the project should be accepted.
It will increase the profits of me company by $100,000 (500 X $200)
Does this meet the goal?
Correct Answer:
A
- (Topic 1)
A company can by identical raw materials from four suppliers. Each supplier offers a different term of sale. Which one of the following terms of sale has the highest effective annual interest rate if the company does not take the cash discount?
Correct Answer:
D
- (Topic 1)
Studler??s Restaurant is considering a contract to supply the weal senior citizen center with 10,000 meals. Regular sales at regular prices would be unaffected. The food cost for each meal s S3 Additional costs incurred as a result of the contract would De variable overhead of S 50 and variable selling general and administrative costs of S SO per meal sold. The selling price per meal would be $5, A total of $20,000 in fixed costs would be allocated at $2 per meal. The fixed costs are part of an overall total of $500,000 in annual fixed costs incurred regardless of the contract. What will be the effect on pretax income if Studiers takes the special order?
Correct Answer:
A
- (Topic 1)
A company has hired a consultant to propose a way to increase the company's revenues. The consultant has evaluated two mutually exclusive projects with me following information provided for each project.
The company uses a discount rate of 9% to evaluate both projects Based on the net present value, the company should invest in
Correct Answer:
A
- (Topic 1)
London Corporation has in the following cost structure for two of its product.
Assume that me current sales level is 15,000 units of Product A and 5,000 units of Product B Using cost-volume-profit analysis which of the following courses of action would maximize profit in the short term? Assume that fixed costs are sunk costs in the short term.
Correct Answer:
A