Exam 12: Differential Analysis: The Key to Decision Making

Kahn Corporation (a multi-product company)produces and sells 8,000 units of Product X each year.Each unit of Product X sells for $10 and has a contribution margin of $6.If Product X is discontinued,$50,000 of the $60,000 in annual fixed costs charged to Product X could be eliminated.The annual financial advantage (disadvantage)for the company of eliminating this product should be:

Consider the following production and cost data for two products,L and C: A total of 60,000 machine minutes are available each period and there is unlimited demand for each product.What is the largest possible total contribution margin that can be realized each period?

Vannorman Corporation processes sugar beets in batches.A batch of sugar beets costs $78 to buy from farmers and $18 to crush in the company's plant.Two intermediate products,beet fiber and beet juice,emerge from the crushing process.The beet fiber can be sold as is for $25 or processed further for $16 to make the end product industrial fiber that is sold for $57.The beet juice can be sold as is for $39 or processed further for $22 to make the end product refined sugar that is sold for $84.How much profit (loss)does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?