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Rosecrans Manufacturing produces kerosene lanterns. The Company can sell all of its output. Each unit sells for $120,and direct materials costing $48 per unit are added at the start of the frit operation. Other variable caste are immaterial. Production data for one of one of its products is presented below:
Rosecrans hires additional workers at a cost of $500,000 per year to expedite setups and materials handling in the bottleneck operation .As a result, the annual output of the bottleneck operation increases by 500 units. The Change in operating income Attributable to the increase in workers is
Suggested Answer: C
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Decentralization results in greater speed in making operating decisions because they are made by lower-level managers instead of being referred to top management. The quality of operating decisions should also be enhanced, assuming proper training of managers, because those closest to the problems should be the most knowledgeable about them.
39 comments · newest first
LI
Linette
11 months ago
$500,000 for 500 units? That seems off to me.
GO
Golda
11 months ago
Totally agree, the extra units should boost income!
AN
Antione
12 months ago
Wait, how can hiring more workers lead to a loss?
LA
Lavonna
12 months ago
I think the increase in output is worth it!
LE
Lettie
12 months ago
Each lantern sells for $120 and materials cost $48.
JE
Jeff
1 year ago
I think I remember that the change in operating income would be the additional revenue minus the costs. If we sell 500 more units, that’s $60,000 in revenue, but then we have to subtract the $500,000 cost. I’m leaning towards option C or D.
CH
Chandra
1 year ago
I feel a bit confused about the total costs involved. If the additional workers cost $500,000 and we only gain 500 units, does that mean we need to calculate the total revenue from those units first?
CO
Coletta
1 year ago
This question seems similar to one we practiced where we had to analyze the impact of fixed costs on operating income. I think the contribution margin here is $72 per unit.
JO
Jose
1 year ago
I remember we discussed how to calculate the contribution margin per unit, but I'm not entirely sure how to factor in the additional costs of hiring workers.
JE
Jeannetta
1 year ago
I'm a bit confused on the difference between isShareable, isEditable, and isCreatable. I'll need to review those Apex methods to make sure I'm using them correctly.
TE
Teri
1 year ago
Okay, let me see... I think the key is understanding the concept of "data protection by design" from the beginning.
KA
Kallie
1 year ago
Okay, I can see that we need to add an app to the Teams client for a specific group of users. The question mentions the Microsoft Teams admin center, so I'm guessing that's where we'll need to make the changes.
NI
Nina
1 year ago
This question reminds me of a similar practice one we did about overhead costs; I think I'll need to calculate the differences first.
MI
Micheline
1 year ago
I think we might be looking at a Full Release since it involves significant changes to related systems, right?
YO
Youlanda
1 year ago
Alright, let's do this! Time to put my accounting skills to the test and find the correct answer. No pressure, right?
MA
Marla
1 year ago
Hold on, I'm getting hungry just thinking about this. I wonder if Rosecrans makes any edible lanterns? Might be a good business opportunity.
SU
Sunshine
1 year ago
D) $(20,000)
CR
Crista
1 year ago
C) $(14,000)
KR
Kristofer
1 year ago
B) $36,000
VI
Virgina
1 year ago
A) $50,000
LA
Lashon
1 year ago
Ah, I see! So the variable costs are immaterial, which means the increase in output will directly translate to more revenue. Let's crunch the numbers.
DY
Dylan
1 year ago
D) $(20,000)
GL
Glory
1 year ago
C) $(14,000)
GE
Gerald
1 year ago
B) $36,000
DO
Dorsey
1 year ago
A) $50,000
NO
Noah
1 year ago
D) $(20,000)
LE
Leah
1 year ago
C) $(14,000)
LI
Linn
1 year ago
B) $36,000
PO
Portia
1 year ago
A) $50,000
DA
Daniel
1 year ago
I think the answer is C) $(14,000) because hiring additional workers increased costs more than the revenue generated.
CH
Chau
2 years ago
Hmm, this seems like a tricky one. I'll need to carefully calculate the impact of the increased production on the operating income.
KA
Kathrine
1 year ago
I believe the change in operating income will be $36,000.
BO
Bobbye
1 year ago
B) $36,000
EV
Evan
1 year ago
I think the additional workers will increase the operating income by $50,000.
SA
Sage
1 year ago
B) $36,000
PA
Patria
1 year ago
A) $50,000
EM
Emeline
1 year ago
A) $50,000
LO
Lourdes
2 years ago
I disagree, I believe the correct answer is B) $36,000.
JO
Josue
2 years ago
I think the answer is A) $50,000.