122. How much will the company’s profits be increased or (decreased) if it prices the 100 units at $7 each?
A) $(30)
B) $150
C) $0
D) $310
123. Assume the company has 50 units left over from last year which have small defects and which will have
to be sold at a reduced price for scrap. The sale of these defective units will have no effect on the company’s
other sales. Which of the following costs is relevant in this decision?
A) $3.50 variable manufacturing cost
B) $3.90 unit product cost
C) $2.00 variable selling and administrative cost
D) $6.70 full cost
124. Assume that Melrose expects to sell 60,000 units of Product C to regular customers next year. At what
selling price for the 7,000 units would Melrose be economically indifferent between accepting and rejecting
the special order from Moore?
A) $53.00
B) $54.50
C) $75.00
D) $76.50
125. Assume Melrose expects to sell 60,000 units of Product C to regular customers next year. If Moore
company offers to buy the 7,000 special units at $90 per unit, the effect of accepting the special order on
Melrose’s net operating income for next year will be:
A) $42,000 increase
B) $54,000 decrease
C) $105,000 increase
D) $248,500 increase
126. Suppose Melrose can sell 68,000 units of Product C to regular customers next year. If Moore
Corporation offers to buy the special order units at $90 per unit, the effect of accepting the special order for
7,000 units on Melrose’s net operating income for next year will be a:
A) $79,500 increase
B) $104,000 increase
C) $114,500 increase
D) $294,000 increase
127. If Madison has a limit of 10,000 direct labor hours but no limit on machine hours, then the ranking of the
products from the most profitable to the least profitable use of the constrained resource is:
A) A, B, C
B) B, C, A
C) C, A, B
D) A, C, B
128. If Madison has a limit of 15,000 machine hours but no limit on direct labor hours, then the ranking of the
products from the most profitable to the least profitable use of the constrained resource is:
A) A, B, C
B) B, C, A
C) A, C, B
D) C, A, B
129. How many minutes of grinding machine time would be required to satisfy demand for all four products?
A) 10,500
B) 10,700
C) 11,000
D) 10,800
130. Which product makes the LEAST profitable use of the grinding machines?
A) Product A
B) Product B
C) Product C
D) Product D
131. Which product makes the MOST profitable use of the grinding machines?
A) Product A
B) Product B
C) Product C
D) Product D
132. Up to how much should the company be willing to pay for one additional minute of grinding machine time
if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest
whole cent.)
A) $10.60
B) $21.90
C) $0
D) $19.25
133. If direct labor-hours is the company’s production constraint, then the ranking of the products from the
most profitable to the least profitable use of the constrained resource is:
A) A, B, C
B) B, C, A
C) C, A. B
D) A, C, B
134. If machine-hours is Madison’s production constraint, then the ranking of the products from the most
profitable to the least profitable use of the constrained resource is:
A) A, B, C
B) A, C, B
C) B, C, A
D) C, A, B
135. Rank the products in order of their current profitability from most profitable to least profitable. In other
words, rank the products in the order in which they should be emphasized.
A) PW,UN,ZG
B) UN,ZG,PW
C) ZG,PW,UN
D) UN,PW,ZG
136. Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least
profitable product. Up to how much should the company be willing to pay to acquire more of this constrained
resource?
A) $15.30 per minute
B) $18.80 per minute
C) $77.08 per unit
D) $122.10 per unit
137. How many minutes of milling machine time would be required to satisfy demand for all four products?
A) 22,600
B) 23,700
C) 18,400
D) 9,000
138. Which product makes the LEAST profitable use of the milling machines?
A) Product A
B) Product B
C) Product C
D) Product D
139. Which product makes the MOST profitable use of the milling machines?
A) Product A
B) Product B
C) Product C
D) Product D
140. Up to how much should the company be willing to pay for one additional minute of milling machine time if
the company has made the best use of the existing milling machine capacity? (Round your answer to the
nearest whole cent.)
A) $11.00
B) $0.00
C) $4.55
D) $15.00
141. Rank the products in order of their current profitability from most profitable to least profitable. In other
words, rank the products in the order in which they should be emphasized.
A) TC,KA,PA
B) PA,TC,KA
C) TC,PA,KA
D) KA,TC,PA
142. Assume that sufficient constraint time is available to satisfy demand for all but the least profitable
product. Up to how much should the company be willing to pay to acquire more of the constrained resource?
A) $10.80 per minute
B) $69.44 per unit
C) $16.40 per minute
D) $14.04 per unit
143. How much more profit (loss) does the company make by processing one batch of sugar beets into the
end products industrial fiber and refined sugar?
A) $(8)
B) $13
C) $(89)
D) $5
144. How much more profit (loss) does the company make by processing the intermediate product beet juice
into refined sugar rather than selling it as is?
A) $(34)
B) $(11)
C) $(26)
D) $(57)
145. Which of the intermediate products should be processed further?
A) beet fiber should be processed into industrial fiber; beet juice should be processed into refined sugar
B) beet fiber should NOT be processed into industrial fiber; beet juice should NOT be processed into refined
sugar
C) beet fiber should be processed into industrial fiber; beet juice should NOT be processed into refined sugar
D) beet fiber should NOT be processed into industrial fiber; beet juice should be processed into refined sugar
146. If P is processed further and then sold, rather than being sold at the split-off point, the change in monthly
net operating income would be a:
A) $147,000 decrease
B) $147,000 increase
C) $39,000 increase
D) $39,000 decrease
147. What would the selling price per unit of Product P need to be after processing in order for Paulsen
Corporation to be economically indifferent between selling P at the split-off point or processing P further?
A) $7.85
B) $8.58
C) $9.49
D) $11.68
148. How much more profit (loss) does the company make by processing one batch of sugar cane into the
end products industrial fiber and molasses?
A) $(96)
B) $1
C) $7
D) $6
149. How much more profit (loss) does the company make by processing the intermediate product cane juice
into molasses rather than selling it as is?
A) $(43)
B) $(17)
C) $10
D) $(3)
150. Which of the intermediate products should be processed further?
A) Cane fiber should NOT be processed into industrial fiber; Cane juice should be processed into molasses
B) Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT be processed into
molasses
C) Cane fiber should be processed into industrial fiber; Cane juice should NOT be processed into molasses
D) Cane fiber should be processed into industrial fiber; Cane juice should be processed into molasses
151. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
A) $1,600
B) $22,400
C) $27,600
D) $(3,600)
152. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?
A) $3,500
B) $7,900
C) $29,900
D) $25,500
153. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off
point?
A) $22,400
B) $43,400
C) $20,800
D) $45,000
Essay
[QUESTION]
154. Nicklin Corporation is considering two alternatives that are code-named M and N. Costs associated with
the alternatives are listed below:
Alternative M Alternative N
Supplies costs $32,000 $58,000
Assembly costs $47,000 $47,000
Power costs $28,000 $23,000
Inspection costs $16,000 $16,000
Required:
a. Which costs are relevant and which are not relevant in the choice between these two alternatives?
b. What is the differential cost between the two alternatives?
155. Costs associated with two alternatives, code-named Q and R, being considered by Hunnicutt
Corporation are listed below:
Alternative Q Alternative R
Supplies costs $69,000 $69,000
Power costs $38,000 $38,000
Inspection costs $15,000 $26,000
Assembly costs $40,000 $28,000
Required:
a. Which costs are relevant and which are not relevant in the choice between these two alternatives?
b. What is the differential cost between the two alternatives?
156. The management of Bercegeay Corporation is considering dropping product Y25C. Data from the
company’s accounting system appear below:
Sales $610,000
Variable expenses $244,000
Fixed manufacturing expenses $226,000
Fixed selling and administrative expenses $171,000
All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further
investigation has revealed that $117,000 of the fixed manufacturing expenses and $78,000 of the fixed selling
and administrative expenses are avoidable if product Y25C is discontinued.
Required:
a. What is the net operating income earned by product Y25C according to the company’s accounting system?
Show your work!
b. What would be the effect on the company’s overall net operating income of dropping product Y25C?
Should the product be dropped? Show your work!