Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
89) Holden Corporation produces three products, with costs and selling prices as follows:
Product A
Product B
Product C
Selling price per unit
$
30
100
%
$
20
100
%
$
15
100
%
Variable costs per unit
18
60
%
15
75
%
6
40
%
Contribution margin per unit
$
12
40
%
$
5
25
%
$
9
60
%
A particular machine is the bottleneck. On that machine, 3 machine hours are required to
produce each unit of Product A, 1 hour is required to produce each unit of Product B, and 2
hours are required to produce each unit of Product C. Rank the products from the most profitable
to the least profitable use of the constrained resource (bottleneck).
A) C, A, B
B) A, C, B
C) B, C, A
D) B, A, C
90) Consider the following production and cost data for two products, L and C:
Product L
Product C
Contribution margin per unit
$
120
$
112
Machine minutes needed per unit
10
minutes
8
minutes
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?
A) $720,000
B) $840,000
C) $780,000
D) $1,560,000
91) The constraint at Rauchwerger Corporation is time on a particular machine. The company
makes three products that use this machine. Data concerning those products appear below:
WX
KD
FS
Selling price per unit
$
192.00
$
542.66
$
222.84
Variable cost per unit
$
158.72
$
420.54
$
167.76
Minutes on the constraint
3.20
8.60
3.60
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 the constrained resource?
A) $33.28 per unit
B) $10.40 per minute
C) $122.12 per unit
D) $15.30 per minute
92) Paine Corporation processes sugar beets in batches that it purchases from farmers for $72 a
batch. A batch of sugar beets costs $11 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 $27 or processed further for $16 to make the end product industrial fiber that is sold for
$40. The beet juice can be sold as is for $43 or processed further for $28 to make the end product
refined sugar that is sold for $100. Which of the intermediate products should be processed
further?
A) beet fiber should NOT 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 be processed into industrial fiber; beet juice should be processed into refined
sugar
93) Cybil Baunt just inherited a 1958 Chevy Impala from her late Aunt Joop. Aunt Joop
purchased the car 40 years ago for $8,000. Cybil is either going to sell the car for $10,000 or
have it restored and then sell it for $22,000. The restoration will cost $9,000. Cybil would be
financially better off by:
A) $3,000 to have the vehicle restored
B) $6,000 to have the vehicle restored
C) $9,000 to have the vehicle restored
D) $11,000 to have the vehicle restored
94) The Freed Corporation produces three products, X, Y, Z, from a single raw material input.
Product Y can be sold at the split-off point for total annual revenues of $50,000, or it can be
processed further at a total annual cost of $16,000 and then sold for $68,000. Which of the
following statements is true concerning Product Y?
A) Product Y should be sold at the split-off point rather than processed further.
B) The annual financial advantage from processing Product Y further is $18,000.
C) The annual financial advantage from processing Product Y further is $68,000.
D) The annual financial advantage from processing Product Y further is $2,000.
95) Two products, QI and VH, emerge from a joint process. Product QI has been allocated
$9,600 of the total joint costs of $12,000. A total of 9,000 units of product QI are produced from
the joint process. Product QI can be sold at the split-off point for $13 per unit, or it can be
processed further for an additional total cost of $54,000 and then sold for $18 per unit. If product
QI is processed further and sold, what would be the financial advantage (disadvantage) for the
company compared with sale in its unprocessed form directly after the split-off point?
A) ($18,600)
B) $108,000
C) $600
D) ($9,000)
96) WP Corporation produces products X, Y, and Z from a single raw material input in a joint
production process. Budgeted data for the next month is as follows:
Product X
Product Y
Product Z
Units produced
1,500
2,000
3,000
Per unit sales value at split-off
$
19.00
$
21.00
$
24.00
Added processing costs per unit
$
7.00
$
7.50
$
7.00
Per unit sales value if processed further
$
29.00
$
29.00
$
30.00
The cost of the joint raw material input is $149,000. Which of the products should be processed
beyond the split-off point?
Product X
Product Y
Product Z
A)
Yes
Yes
No
B)
No
Yes
No
C)
Yes
No
Yes
D)
No
Yes
Yes
A) Choice A
B) Choice B
C) Choice C
D) Choice D
97) The Wyeth Corporation produces three products, A, B, and C, from a single raw material
input. Product A can be sold at the splitoff point for $40,000, or it can be processed further at a
total cost of $15,000 and then sold for $58,000. Joint costs total $60,000 annually. Product A
should be:
A) discontinued because revenues after further processing are less than total joint costs.
B) sold at the split-off point.
C) processed further and then sold.
D) processed further only if its share of the total joint costs is less than the incremental revenues
from further processing.
98) 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 rather than not processing that
batch at all?
A) ($134)
B) ($32)
C) $7
D) $39
99) Priddy Corporation processes sugar cane in batches. The company purchases a batch of sugar
cane for $62 from farmers and then crushes the cane in the company's plant at the cost of $18.
Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The
cane fiber can be sold as is for $28 or processed further for $13 to make the end product
industrial fiber that is sold for $36. The cane juice can be sold as is for $43 or processed further
for $23 to make the end product molasses that is sold for $85. 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 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 be processed into
molasses
D) Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT be
processed into molasses
100) Stinehelfer Beet Processors, Inc., processes sugar beets in batches. A batch of sugar beets
costs $56 to buy from farmers and $13 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 $24 or processed further for $12 to make the end product industrial fiber that is sold for
$31. The beet juice can be sold as is for $43 or processed further for $29 to make the end product
refined sugar that is sold for $91. What is the financial advantage (disadvantage) for the
company from processing the intermediate product beet juice into refined sugar rather than
selling it as is?
A) $19
B) $6
C) ($50)
D) ($16)
101) Drew Cane Products, Inc., processes sugar cane in batches. The company buys a batch of
sugar cane from farmers for $90 which is then crushed in the company's plant at a cost of $11.
Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The
cane fiber can be sold as is for $21 or processed further for $13 to make the end product
industrial fiber that is sold for $45. The cane juice can be sold as is for $41 or processed further
for $29 to make the end product molasses that is sold for $103. What is the financial advantage
(disadvantage) for the company from processing one batch of sugar cane into the end products
industrial fiber and molasses rather than not processing that batch at all?
A) $44
B) ($143)
C) ($39)
D) $5
102) Faustina Chemical Corporation manufactures three chemicals (TX14, NJ35, and KS63)
from a joint process. The three chemicals are in industrial grade form at the split-off point. They
can either be sold at that point or processed further into premium grade. Costs related to each
batch of this chemical process is as follows:
TX14
NJ35
KS63
Sales value at split-off point
$
16,000
$
12,000
$
5,000
Allocated joint costs
$
6,000
$
6,000
$
6,000
Sales value after further processing
$
20,000
$
18,000
$
9,000
Cost of further processing
$
5,000
$
3,000
$
2,000
For which product(s) above would it be more profitable for Faustina to sell at the split-off point
rather than process further?
A) TX14 only
B) KS63 only
C) TX14 and KS63 only
D) NJ35 and KS63 only
103) Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the
alternatives are listed below:
Alternative
A
Alternative
B
Materials costs
$
40,000
$
56,000
Processing costs
$
37,000
$
37,000
Equipment rental
$
13,000
$
13,000
Occupancy costs
$
15,000
$
22,000
Are the materials costs and processing costs relevant in the choice between alternatives A and B?
A) Both materials costs and processing costs are relevant
B) Neither materials costs nor processing costs are relevant
C) Only processing costs are relevant
D) Only materials costs are relevant
104) Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the
alternatives are listed below:
Alternative
A
Alternative
B
Materials costs
$
40,000
$
56,000
Processing costs
$
37,000
$
37,000
Equipment rental
$
13,000
$
13,000
Occupancy costs
$
15,000
$
22,000
What is the financial advantage (disadvantage) of Alternative B over Alternative A?
A) $105,000
B) $23,000
C) $128,000
D) $116,500
105) Two alternatives, code-named X and Y, are under consideration at Guyer Corporation.
Costs associated with the alternatives are listed below.
Alternative
X
Alternative
Y
Materials costs
$
41,000
$
59,000
Processing costs
$
45,000
$
45,000
Equipment rental
$
17,000
$
17,000
Occupancy costs
$
16,000
$
24,000
Are the materials costs and processing costs relevant in the choice between alternatives X and Y?
A) Neither materials costs nor processing costs are relevant
B) Only processing costs are relevant
C) Only materials costs are relevant
D) Both materials costs and processing costs are relevant
106) Two alternatives, code-named X and Y, are under consideration at Guyer Corporation.
Costs associated with the alternatives are listed below.
Alternative
X
Alternative
Y
Materials costs
$
41,000
$
59,000
Processing costs
$
45,000
$
45,000
Equipment rental
$
17,000
$
17,000
Occupancy costs
$
16,000
$
24,000
What is the financial advantage (disadvantage) of Alternative Y over Alternative X?
A) $132,000
B) $119,000
C) $145,000
D) $26,000
107) The sunk cost in this situation is:
A) $10,000
B) $26,800
C) $11,200
D) $0
108) What is the financial advantage (disadvantage) to the company from upgrading the
calculators?
A) $8,800
B) ($18,000)
C) $20,000
D) ($8,000)
109) Assume that Tolar decides to upgrade the calculators. At what selling price per unit would
the company be as well off as if it just sold the calculators in their present condition?
A) $8 per calculator
B) $30 per calculator
C) $53 per calculator
D) $67 per calculator
110) The management of Bonga Corporation is considering dropping product D74F. Data from
the company's accounting system for this product for last year appear below:
Sales
$830,000
Variable expenses
$390,000
Fixed manufacturing expenses
$266,000
Fixed selling and administrative expenses
$232,000
All fixed expenses of the company are fully allocated to products in the company's accounting
system. Further investigation has revealed that $111,000 of the fixed manufacturing expenses
and $103,000 of the fixed selling and administrative expenses are avoidable if product D74F is
discontinued.
According to the company's accounting system, what is the net operating income earned by
product D74F? Include all costs in this calculation—whether relevant or not.
A) ($58,000)
B) ($440,000)
C) $58,000
D) $440,000
