Acct test 3

Product U23N has been considered a drag on profits at Jinkerson Corporation for some time and management is considering discontinuing the product altogether. Data from the company's budget for the upcoming year appear below: Sales $730,000 Variable expenses $350,000 Fixed manufacturing expenses $234,000 Fixed selling and administrative expenses $161,000 In the company's accounting system, all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $144,000 of the fixed manufacturing expenses and $93,000 of the fixed selling and administrative expenses are avoidable if product U23N is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:

$(143,000) Disadvantage

​Well Water Inc. wants to produce and sell a new flavored water. In order to penetrate the market, the product will have to sell at $2.00 per 12 oz. bottle. The following data has been collected: Annual sales​​75,000 bottles Projected selling and administrative costs​$12,000 Desired profit​​$90,000 ​The target cost per bottle (including selling and administrative costs) is:

$0.80

Tasty Bites produces corn chips. The cost of one batch is below: Direct materials​$18 Direct labor​13 Variable overhead​11 Fixed overhead​14 An outside supplier has offered to produce the corn chips for $30 per batch. How much will Tasty Bites save if it accepts the offer?

$12 per batch

The BRS Corporation makes collections on sales according to the following schedule: 30% in month of sale 60% in month following sale 10% in second month following sale The following sales have been budgeted: Sales April $140,000 May $130,000 June $150,000 Budgeted cash collections in June would be:

$137,000

Tracie Corporation manufactures and sells women's skirts. Each skirt (unit) requires 2.2 yards of cloth. Selected data from Tracie's master budget for next quarter are shown below: Budgeted sales (in units) July7,000 August9,000 September11,000 Budgeted production (in units) July 8,000 August 10,500 September . 13,000 Each unit requires 0.8 hours of direct labor, and the average hourly cost of Tracie's direct labor is $18. What is the cost of Tracie Corporation's direct labor in September?

$187,200

​A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units: Direct materials​$ 4 Direct labor​10 Variable overhead​8 Fixed overhead​6 A foreign company wants to purchase 2,000 units at a special unit price of $25. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $4,000 in order to stamp the foreign company's name on the product. The incremental income (loss) from accepting the order is

$2000

Billings Company has the following costs when producing 100,000 units: Variable costs​$600,000 Fixed costs​900,000 ​An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $165,000. The net increase (decrease) in the net income of accepting the supplier's offer is

$315,000

​​A segment has the following data: Sales​$700,000 Variable expenses​300,000 Fixed expenses​550,000 What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments?

$400,000 decrease

The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,400 direct labor-hours will be required in January. The variable overhead rate is $1.30 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $60,280 per month, which includes depreciation of $17,160. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

$48,840

Bellingham Suit Co. has received a shipment of suits that cost $300 each. If the company uses cost-plus pricing and applies a markup percentage of 60%, what is the sales price per suit?

$480

LBC Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.5 hours of direct labor at the rate of $14.50 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June. The budgeted direct labor cost per unit of Product WZ would be:

$50.75

All of Gaylord Corporation's sales are on account. Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following sale, and the remainder are collected in the second month following sale. The following are budgeted sales data for the company: January February March April Total sales $50,000 $60,000 $40,000 $30,000 What is the amount of cash that should be collected in March?

$51,000

Galley Industries can produce 100 units of a necessary component part with the following costs: Direct Materials​$20,000 Direct Labor​9,000 Variable Overhead​21,000 Fixed Overhead​8,000 If Galley Industries purchases the component externally, $2,000 of the fixed costs can be avoided. Below what external price for the 100 units would Galley choose to buy instead of make?

$52,000

Pabon Corporation makes one product. Budgeted unit sales for August and September are 11,100 and 12,600 units, respectively. The ending finished goods inventory equals 40% of the following month's sales. The direct labor wage rate is $19.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours. The estimated direct labor cost for August is closest to:

$555,750

​Able Company's unit manufacturing cost is: Variable Costs​$50 Fixed Costs​25 A special order for 2,000 units has been received from a foreign company. The unit price requested is $55. The normal unit price is $80. If the order is accepted, unit variable costs will increase by $2 for additional freight costs. If the order is accepted, incremental profit (loss) will be

$6,000

Mallory Company manufactures widgets. Bowden Company has approached Mallory with a proposal to sell the company widgets at a price of $82,000 for 100,000 units. Mallory is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced: Direct material​$ 31,000 Direct labor​29,000 Manufacturing overhead​ 40,000 Total​$100,000 The manufacturing overhead consists of $16,000 of costs that will be eliminated if the components are no longer produced by Mallory. From Mallory's point of view, how much is the incremental cost or savings if the widgets are bought instead of made?

$6,000 incremental cost

Haylock Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 5,600 direct labor-hours will be required in August. The variable overhead rate is $5.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $69,440 per month, which includes depreciation of $15,680. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

$84,000

Bux Corporation produces and sells one product. In November it expects to sell 10,600 units of this product. The company's variable selling and administrative expense is $3.70 per unit sold and its fixed selling and administrative expense is $60,000 per month (which includes $10,000 of depreciation expense). The estimated selling and administrative expense for November is closest to:

$89,220

Brislin Products has a new product going on the market next year. The following data are projections for production and sales: Variable costs​$500,000 Fixed costs​$900,000 ROI (Return on Investment)​14% Investment​$4,000,000 Sales​200,000 units ​What is the target selling price per unit?

$9.80

Acti Manufacturing Corporation is estimating the following raw material purchases for the final four months of the year: September $830,000 October $940,000 November $860,000 December $780,000 At Acti, 40% of raw materials purchases are normally paid for in the month of purchase. The remaining 60% is paid for in the month following the purchase. How much cash should Acti expect to pay out for raw material purchases during November?

$908,000

Martin Company incurred the following costs for 70,000 units: Variable costs​$420,000 Fixed costs​ 392,000 Martin has received a special order from a foreign company for 3,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $6,300 for shipping. If Martin wants to earn $6,000 on the order, what should the unit price be?

10.10

Parwin Corporation plans to sell 23,000 units during August. If the company has 8,000 units on hand at the start of the month, and plans to have 9,000 units on hand at the end of the month, how many units must be produced during the month?

24,000

A company is deciding on whether to replace some old equipment with new equipment. Which of the following is not a relevant cost for incremental analysis?

Accumulated depreciation on the old equipment

​A company is deciding whether or not to replace some old equipment with new equipment. Which of the following is not considered in the incremental analysis?

Book value of the old equipment

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: Direct Materials​$120,000 Direct Labor​25,000 Variable Overhead​45,000 Fixed Overhead​30,000

Buy and save $5,000

New Age Makeup produces face cream. Each bottle of face cream costs $10 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. New Age Makeup could sell the sunscreen bottles for $23 each.

Face cream must not be processed further because costs increase more than revenue.

Which of the following is not involved in the sell or process further decision? a.​Revenues b.​Variable costs c.​Opportunity costs d.​Fixed costs

Fixed cost

Baden Company manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $140 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

Income would increase by $40,000.

​It costs Lannon Fields $28 of variable costs and $12 of allocated fixed costs to produce an industrial trash can that sells for $60. A buyer in Mexico offers to purchase 3,000 units at $36 each. Lannon Fields has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income?

Increase $24,000

In a make-or-buy decision, which costs can be considered relevant?

Incremental variable costs, incremental fixed costs, and opportunity costs

Fornelli, Inc. can produce 100 units of a component part with the following costs: Direct Materials​$15,000 Direct Labor​6,500 Variable Overhead​16,000 Fixed Overhead​11,000 If Fornelli, Inc. can purchase the component part externally for $44,000 and only $4,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

Make and save $2,500

Pratt Company has old inventory on hand that cost $15,000. Its scrap value is $20,000. The inventory could be sold for $50,000 if manufactured further at an additional cost of $15,000. What should Pratt do?

Manufacture further and sell it for $50,000

Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?

Net income will increase if the special sales price per unit exceeds the unit variable costs.

​Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?

Net income will increase if the special sales price per unit exceeds the unit variable costs.

Eddy Company is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60, and Eddy Company would sell it for $135. The cost to assemble the product is estimated at $27 per unit and Eddy Company believes the market would support a price of $174 on the assembled unit. What is the correct decision using the sell or process further decision rule?

Process further, the company will be better off by $12 per unit.

A company has a process that results in 24,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $160,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?

Sell now, the company will be better off by $16,000.

​ All of the following are relevant in deciding whether to eliminate an unprofitable segment except the segment's a.​sales. b.​variable expenses. c.​contribution margin. d.​sunk costs

Sunk cost

​In an equipment replacement decision, the cost of the old equipment is a(n)

Sunk cost

​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?

The annual financial advantage from processing Product Y further is $2,000.

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

The salvage value of the old equipment

​Why are budgets useful in the planning process?

They help communicate goals and provide a basis for evaluation.

​A company is considering the following alternatives: ​Alternative 1​ Alternative 2 Revenues​$120,000​ $120,000 Variable costs​60,000​ 70,000 Fixed costs​35,000​ 35,000 Which of the following are relevant in choosing between the alternatives?

Variable Cost

Miley, Inc. has excess capacity. Under what situations should the company accept a special order for less than the current selling price?

When incremental revenues exceed incremental costs

The potential effects of the decision to eliminate a line of business on existing employees and the community are

qualitative factors

​The potential effects of the decision to eliminate a line of business on existing employees and the community are

qualitative factors.

The decision rule on whether to sell or process further

is process further if incremental revenue from such processing exceeds the incremental processing costs.

The primary benefits of budgeting include all of the following except it a.​requires only top management to plan ahead and formalize their future goals. b.​provides definite objectives for evaluating performance. c.​creates an early warning system for potential problems. d.​motivates personnel throughout the organization.

requires only top management to plan ahead and formalize their future goals.

Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2019: Sales​$1,400,000 Variable expenses​ 920,000 Fixed expenses​ 600,000 Net loss​$ (120,000) If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line?

​$1,100,000

​A segment has the following data: Sales​$700,000 Variable expenses​300,000 Fixed expenses​550,000 What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments?

​$400,000 decrease

Saran Company has contacted Truckel with an offer to sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets, variable costs are $16 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Truckel make or buy the wickets?

​Buy; savings = $5,000

​A company is within plant capacity. It is contemplating whether a special order should be accepted. The order will not impact regular sales. If the company accepts the special order, what will occur?

​Net income will increase if the special sales price per unit exceeds the unit variable costs