Duxeva produces two products named BigBlast and LittleBlast. Last month 2,000 units of BigBlast and 4,000 units of the LittleBlast were produced and sold. Following are average prices and costs for last month: $\begin{array}{lcc}
&\underline{\text { BigBlast }}&\underline{\text { LittleBlast }}\
\text { Selling price } & \$ 100 & \$ 200 \
\text { Direct materials } & (25) & (75) \
\text { Direct labor } & (15) & (35) \
\text { Variable overhead } & (5) & (30) \
\text { Product line fixed costs } & (10) & (40) \
\text { Corporate fixed costs } &\underline{ (25) }&\underline{ (25) }\
\quad \text { Average margin per unit } &\underline{\underline{ \$ 20 }}& \underline{\underline{\$(5)}}
\end{array}$
The production lines for both products are highly automated, so large changes in production cause very little change in total direct labour costs. Workers who are classified as direct labour monitor the production line and are permanent employees who regularly work 40 hours per week. All costs other than "corporate fixed costs" listed under each product line could be avoided if the product line were dropped. Using only the information provided above, Duxeva could make several types of decisions.
Possible decisions include:
I$\quad $Special order
II$\quad $Product emphasis
III$\quad $Keep or drop
IV$\quad $Constrained resources
A) I and II only
B) I and III only
C) I, II, and IV only
D) III and IV only

Question

Duxeva produces two products named BigBlast and LittleBlast. Last month 2,000 units of BigBlast and 4,000 units of the LittleBlast were produced and sold. Following are average prices and costs for last month: $\begin{array}{lcc}
&\underline{\text { BigBlast }}&\underline{\text { LittleBlast }}\
\text { Selling price } & \$ 100 & \$ 200 \
\text { Direct materials } & (25) & (75) \
\text { Direct labor } & (15) & (35) \
\text { Variable overhead } & (5) & (30) \
\text { Product line fixed costs } & (10) & (40) \
\text { Corporate fixed costs } &\underline{ (25) }&\underline{ (25) }\
\quad \text { Average margin per unit } &\underline{\underline{ \$ 20 }}& \underline{\underline{\$(5)}}
\end{array}$
 The production lines for both products are highly automated, so large changes in production cause very little change in total direct labour costs. Workers who are classified as direct labour monitor the production line and are permanent employees who regularly work 40 hours per week. All costs other than "corporate fixed costs" listed under each product line could be avoided if the product line were dropped. Using only the information provided above, Duxeva could make several types of decisions.
Possible decisions include:
I$\quad $Special order
II$\quad $Product emphasis
III$\quad $Keep or drop
IV$\quad $Constrained resources
A) I and II only
B) I and III only
C) I, II, and IV only
D) III and IV only

Quizplus · Accepted Answer

Duxeva can make decisions about special orders and whether to keep or drop a product line. The average margin per unit indicates that LittleBlast is not profitable, which is relevant for a keep or drop decision. Special orders can be considered because they involve pricing and cost analysis. Product emphasis and constrained resources decisions are not directly supported by the given data.

Duxeva Produces Two Products Named BigBlast and LittleBlast The Production Lines for Both Products Are Highly Automated, So