Cost Ch 12
A.C. Tech Manufacturing Appliances manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below. Small Medium Large Unit selling price $450 $600 $1,240 Unit costs: Variable manufacturing (230) (300) (520) Fixed manufacturing (100) (170) (250) Fixed selling and administrative (110) (105) (150) Unit profit $10 $25 $320 Demand in units 120 160 120 Machine−hours per unit 70 50 120 The maximum machine−hours available are 6,100 per week. What is the contribution margin per machine−hour for a medium appliance? A. $6.00 B. $11.50 C. $0.16 D. $0.50
A. $6.00
A decision model involves a(n) ________. A. formal method of making a choice that often involves both quantitative and qualitative analyses B. informal method of making a choice which is discussed in detailed in the financial reports C. informal method of making a choice at the lower level management using sensitivity analysis D. formal method of making a choice at the lower level management using advanced management techniques such as balance scorecard
A. formal method of making a choice that often involves both quantitative and qualitative analyses
McMurphy Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 13,000 units of this part are as follows: Direct materials $87,000 Direct labor 125,000 Variable factory overhead 58,000 Fixed factory overhead 137,000 Total costs $407,000 Of the fixed factory overhead costs, $59,000 is avoidable. Conners Company has offered to sell 13,000 units of the same part to McMurphy Corporation for $37 per unit. Assuming there is no other use for the facilities, Schmidt should ________. A. buy the part, as this would save the company $195,000 B. make the part, as this would save $12 per unit C. buy the part, as this would save $15 per unit D. make the part, as this would save $15 per unit
B. make the part, as this would save $12 per unit
Determining which products should be produced when the plant is operating at full capacity is referred to as a(n) ________. A. total alternative approach B. product−mix decision C. short−run focus decision D. outsourcing analysis
B. product−mix decision
Hartley's Meat Pies is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow: Existing van New van Original cost $59,000 $91,000 Annual operating cost $22,500 $11,000 Accumulated depreciation $33,000 — Current salvage value of the existing van $27,500 — Remaining life 9 years 9 years Salvage value in 9 years $0 $0 Annual depreciation $2,889 $10,111 Sunk costs include ________. A. the current salvage value of the existing van B. the accumulated depreciation of the existing van C. the original cost of the new van D. the annual operating cost of the new van
B. the accumulated depreciation of the existing van
Delicious Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars. For this make−or−buy decision, a cost analysis revealed the following avoidable unit costs for the decorative jars: Direct materials $0.54 Direct labor 0.11 Unit−related support costs 0.22 Batch−related support costs 0.30 Product−sustaining support costs 0.48 Facility−sustaining support costs 0.57 Total cost per jar $2.22 The relevant cost per jar is ________. A. $0.87 per jar B. $1.65 per jar C. $2.22 per jar D. $0.65 per jar
C. $2.22 per jar
Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows: Direct materials $52 Direct labor 45 Variable overhead 33 Fixed overhead 39 Total $169 Crayola Technologies Inc. has contacted Rubium with an offer to sell 7,000 of the subassemblies for $140 each. Rubium will eliminate $89,000 of fixed overhead if it accepts the proposal. What are the relevant costs for Rubium? A. $1,272,000 B. $726,000 C. $999,000 D. $768,000
C. $999,000
Which of the following is not true with regards to relevant costs and relevant revenues? A. They occur in the future B. They are expected costs and expected revenues C. They are sunk costs and historical revenues D. The differ among alternative courses of action
C. They are sunk costs and historical revenues
In order to determine whether a special order should be accepted at full capacity, the sales price of the special order must be compared to the per unit: A. Contribution margin of the special order. B. Variable cost and contribution margin of the special order. C. Variable cost of current production and the contribution margin of the next best alternative. D. Variable cost and contribution margin of the next best alternative.
C. Variable cost of current production and the contribution margin of the next best alternative.
Which of the following is not a qualitative factor that Atlas Manufacturing should consider when deciding whether to buy or make a part used in manufacturing their product? A. Potential loss of trade secrets. B. Quality of the outside producer's product. C. Variable cost per unit of the product. D. Manufacturing deadlines and special orders.
C. Variable cost per unit of the product.
Dantley's Furniture manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $280 per table, consisting of 85% variable costs and 15% fixed costs. The company has surplus capacity available. It is Back Forrest's policy to add a 50% markup to full costs. Dantley's Furniture is invited to bid on a one−time−only special order to supply 130 rustic tables. What is the lowest price Dantley's Furniture should bid on this special order? A. $36,400 B. $23,660 C. $49,140 D. $30,940
D. $30,940
A segment has the following data: Sales $670,000 Variable costs 346,000 Fixed costs 335,500 What will be the incremental effect on net income if this segment is eliminated, assuming the fixed costs will be allocated to profitable segments? A. $334,500 increase B. $346,000 decrease C. $335,500 decrease D. $324,000 decrease
D. $324,000 decrease
Chade Corp. is considering a special order brought to it by a new client. If Chade determines the variable cost to be $9 per unit, and the contribution margin of the next best alternative of the facility to be $5 per unit, then if Chade has: A. Full capacity, the company will be profitable at $4 per unit. B. Full capacity, the selling price must be greater than $5 per unit. C. Excess capacity, the company will be profitable at $6 per unit. D. Excess capacity, the selling price must be greater than $9 per unit.
D. Excess capacity, the selling price must be greater than $9 per unit.
Lees Corp. is deciding whether to keep or drop a small segment of its business. Key information regarding the segment includes: Contribution margin: 35,000 Avoidable fixed costs: 30,000 Unavoidable fixed costs: 25,000 Given the information above, Lees should: A. Drop the segment because avoidable fixed costs exceed unavoidable fixed costs. B. Drop the segment because the contribution margin is less than total fixed costs. C. Keep the segment because the contribution margin exceeds unavoidable fixed costs. D. Keep the segment because the contribution margin exceeds avoidable fixed costs.
D. Keep the segment because the contribution margin exceeds avoidable fixed costs.
Ace Cleaning Service is considering expanding into one or more new market areas. Which costs are relevant to Ace's decision on whether to expand? A. Sunk Costs Variable Costs Opportunity Costs Yes Yes Yes B. Sunk Costs Variable Costs Opportunity Costs Yes No Yes C. Sunk Costs Variable Costs Opportunity Costs No Yes No D. Sunk Costs Variable Costs Opportunity Costs No Yes Yes
D. Sunk Costs Variable Costs Opportunity Costs No Yes Yes
John's 8−year−old Chevrolet Trail Blazer requires repairs estimated at $11,000 to make it road worthy again. His wife, Sherry, suggested that he should buy a 5−year−old used Jeep Grand Cherokee instead for $11,000 cash. Sherry estimated the following costs for the two cars: Trail Blazer Grand Cherokee Acquisition cost $26,000 $11,000 Repairs $11,000 — Annual operating costs (Gas, maintenance, insurance) $2,680 $1,900 The cost NOT relevant for this decision is the ________. A. annual operating costs of the Grand Cherokee B. repairs to the Trail Blazer C. acquisition cost of the Grand Cherokee D. acquisition cost of the Trail Blazer
D. acquisition cost of the Trail Blazer
