21–21
50.
Refer to the information above. Burns decides to accept the special order for 5,000 units
from Allen at a unit sales price that will add $100,000 per month to its operating income.
The unit price Burns charging Allen is:
John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary
component in each tractor is the motor. John Boyd has the monthly capacity to produce
1,300 motors. The variable costs associated with manufacturing each motor are shown
below:
Fixed manufacturing overhead per month (for up to 1,300 units of production) averages
$27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to
be used in its own outboard motors.
51.
Refer to the information above. If Joan Reid’s order is rejected, what will be John Boyd’s
average unit cost of manufacturing each motor?
52.
Refer to the information above. What is the incremental cost of producing each additional
motor?
53.
Refer to the information above. Assuming John Boyd wants to earn a pretax profit of
$10,000 on this special order, what price must it charge Joan Reid?
JCN Industries normally produces and sells 5,000 keyboards for personal computers each
month. Variable manufacturing costs amount to $25 per unit, and fixed costs are $146,000
per month. The regular sales price of the keyboards is $86 per unit. JCN has been
approached by a foreign company that wants to purchase an additional 1,000 keyboards
per month at a reduced price. Filling this special order would not affect JCN’s regular sales
volume or fixed manufacturing costs.
54.
Refer to the information above. On the basis of the above information only, which of the
following is
not
true?
55.
Refer to the information above. Assume that the price offered by the foreign company is
$43 per unit. Accepting the special order will cause JCN’s operating income to:
56.
Which is an example of joint products?
57.
Products for which sales of one contribute to the sales of another are called:
Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was
discovered that the entire batch was finished improperly. Fancy can sell the tables as
seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for
$605,000.
58.
Refer to the information above. In deciding whether to rework the tables or sell them as is,
management should:
59.
Refer to the information above. Which of the following is
not
relevant to management’s
decision regarding refinishing the tables or selling them as is?
60.
The cost of draining sap out of a maple tree to manufacture maple syrup and maple sugar
is an example of:
61.
Products which emerge from a shared manufacturing process are referred to as:
62.
The Magic Microbrewery has a limited amount of vat capacity available in which it can
ferment beer. In deciding which beers to brew, Magic management should consider:
63.
The Fine Point Company currently produces all of the components for its one product; an
electric pencil sharpener. The unit cost of manufacturing the motor for this pencil
sharpener is:
The company is considering the possibility of buying this motor from a subcontractor and
has been quoted a price of $3.60 per unit. The relevant cost of manufacturing the motor to
be considered in reaching the decision is:
64.
Aircraft Products, a manufacturer of aircraft landing gear, makes 1,000 units each year of a
special valve used in assembling one of its products. The unit cost of producing this valve
includes variable costs of $70 and fixed costs of $60. The valves could be purchased from
an outside supplier at $77 each. If the valve were purchased from the outside supplier, 40%
of the total fixed costs incurred in producing this valve could be eliminated. Buying the
valves from the outside supplier instead of making them would cause the company’s
operating income to:
65.
Refer to the information above. Assume that Perry’s fixed costs remain unchanged if the
seats are purchased from an outside supplier. In order to operate more profitably by buying
the seats rather than manufacturing them, Perry must negotiate a price per unit from the
outside supplier that is less than:
66.
Refer to the information above. Assume that seats can be purchased from the outside
supplier at $25 each, and that 60% of total fixed costs incurred in producing TushSeat will
be eliminated by this strategy. Buying the seats instead of manufacturing them would
cause Perry’s operating income to:
Creative Star Corporation produces three lines of desks from wood: Classic, Royal, and
Standard. Cost and revenue data pertaining to each product are shown below:
Classic desks require five square yards of wood, Royal requires ten square yards, and
Standard requires three square yards. High demand for each product line far exceeds the
company’s production capacity.
67.
Refer to the information above. If Creative Star Corporation has an unlimited supply of
wood available, which products should it produce?
68.
Refer to the information above. If Creative Star Corporation has a limited supply of wood
available, which products should it produce?
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69.
Refer to the information above. If Creative Star Corporation has only 250,000 square yards
of wood available, what is the highest total amount of fixed cost the company can incur and
still break-even?
BT&T Corporation manufactures telephones. Recently, the company produced a batch of
600 defective telephones at a cost of $9,000. BT&T can sell these telephones as scrap for
$9 each. It can also rework the entire batch at a cost of $6,500, after which the telephones
could be sold for $20 per unit.
70.
Refer to the information above. Which of the following statements is
false
regarding the
defective units?
71.
Refer to the information above. If BT&T reworks the defective telephones, by how much
will its operating income change?
General Chemical Company (GCC) manufactures two products as part of a joint process:
A1 and B1. Joint costs up to the split-off point total $22,000. The joint costs are allocated
to A1 and B1 in proportion to their relative sales values. At the split-off point, product A1
can be sold for $42,000, whereas product B1 can be sold for $63,000. Product A1 can be
processed further to make product A2, at an incremental cost of $38,000. A2 can be sold
for $85,000. Product B1 can be processed further to make product B2, at an incremental
cost of $48,000. B2 can be sold for $95,000.
72.
Refer to the information above. Joint costs allocated to product A1 total:
73.
Refer to the information above. Joint costs allocated to product B1 total:
74.
Refer to the information above. The net change in operating income resulting from a
decision to manufacture product A2 is:
75.
Refer to the information above. The net change in operating income resulting from a
decision to manufacture product B2 is:
76.
Seidman Company manufactures and sells 30,000 units of product X per month. Each unit
of product X sells for $16 and has a contribution margin of $7. If product X is discontinued,
$85,000 in fixed monthly overhead costs would be eliminated and there would be no effect
on the sales volume of Seidman Company’s other products. If product X is discontinued,
Seidman Company’s monthly income before taxes should:
77.
Speedy Co. manufactures four products. Direct materials and direct labor are available in
sufficient quantities, but machine capacity is limited to 3,000 hours. Cost and revenue data
for the four products are given below:
Of the four products, which is the most profitable for Speedy Co.?
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78.
Legendary Motors has 7,000 defective autos on hand which cost $12,880,000 to
manufacture. Legendary can either sell these defective autos as scrap for $8,000 per auto,
or spend an additional $18,320,000 on repairs and then sell them for $12,000 per unit. What
is the net advantage to repair the autos compared to selling them for scrap?
Express, Inc., is considering replacing equipment. The following data are available: