acct 13

True or false: In a sell or process decision, either all joint products must be processed or all must be sold.

False

Opportunity costs should ______ be included in a make or buy analysis.

always

Product DGH has a monthly demand of 7,000 units. Its contribution margin is $18 per unit and $36 per direct labor hour. Product RBG has a monthly demand of 5,000 units. It's contribution margin is $15 per unit and $60 per direct labor hour. If the company only has 2,000 direct labor hours available, the company should produce

1,500 5,000

Which of the following are ways in which to calculate the benefit of selecting one alternative over another?

An analysis that looks at all costs and benefits and identifies those that are differential. An analysis that just looks at the relevant costs and benefits. The difference between the net operating income for the two alternatives.

Goodstone Tire Corporation sells tires for $100 each. Per unit costs associated with producing and selling the tires are: Direct materials $35 Direct labor 10 Factory overhead 20 Selling and administrative 15 The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 5,000 tires for $70 each. The order would not require any selling or administrative costs. The purchaser will pay the shipping costs, but Goodstone will have to pay a $100,000 inspection fee in order to be able to make the foreign sale. Accepting the special order will not affect current sales or production. If Goodstone accepts this order, net income will (increase/decrease) by a total of $ .

decrease 15,000

Miracle Clean's variable costs are $3.00 per bottle and Fixed Expenses are $350,000 per year. The company currently sells 150,000 bottles for $6.50 which results in profit of $175,000. The company is considering raising the selling price to $7.00 per bottle which is expected to decrease sales by 20%. If the price is raised profits are expected to

decrease 45,000

Joint costs are ______.

irrelevant in decisions regarding what to do with a product after split-off

True or false: When estimating the cost of taking a 300 mile trip, the average cost per mile × 300 is the best way to evaluate the total cost.

False

A joint product should be processed after split-off if the ______.

incremental revenue after split-off exceeds the incremental processing cost after split-off

Average costs ______.

contain sunk costs are often misleading

Product ABC has a contribution margin per unit of $10.00. Each unit of ABC requires 5 minutes of machine time and 10 minutes of labor time. Product XYZ has a contribution margin per unit of $15.00 and each unit requires 10 minutes of machine time and 5 minutes of labor time. If the company's constraint is labor hours, the contribution margin per unit of constraint for Product XYZ is $

3

Andrews Co. can purchase 20,000 units of Part XYZ from a supplier for $18 per part. The relevant manufacturing costs for the part is $15 per unit. If the company decides to purchase the part, the space now being used can be used to produce another product that will generate a segment margin of $80,000 per year. Should Andrews continue to make or should they buy the part?

Buy — $20,000 advantage.

When making a product line decision, a company may focus on lost contribution margin and avoidable fixed costs or prepare comparative

income statements

Miracle Clean's variable costs are $3.00 per bottle and Fixed Expenses are $350,000 per year. The company currently sells 150,000 bottles for $6.50 which results in profit of $175,000. The company is considering raising the selling price to $6.75 per bottle which is expected to decrease sales by 5%. If the price is raised profits are expected to

increase 9,375