cost accounting chapter 2- decision making

Dynondo's Brakes manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply: Model X Model Y Model Z Selling price $50 $60 $70 Variable Costs $22 $27 $38 Fixed support costs $10 $10 $10 Machine Hours required 1 3 2 Assuming a constraint of machine hours, in what order should the products be built to maximize profits? a X, Z, then Y b Y, X then Z c Z,Y then X d Z, X, then Y

a X, Z, then Y

Lander Metals Inc. manufactures automobile spare parts for car manufacturers. Management is attempting to search for ways to reduce manufacturing labor costs and has received a proposal from a consulting company to rearrange the production floor next year. Using the information below regarding current operations and the new proposal, which of the following decisions should management accept? current proposed required machine operators 16 12 materials handling workers 3 3 employee average pay 15/hr 18/hr hours worked per employee 3400 3150 a Do not change the production floor. b Rearrange the production floor. c Either, because it makes no difference to the employees. d It doesn't matter because the costs incurred will remain the same.

b Rearrange the production floor.

Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter. The past three months of information for Model AE2 are summarized below:  Sales (1,000 units) $300,000 Manufacturing costs: Direct materials 150,000 Direct labor ($15 per hour) 60,000 Overhead 100,000 Operating loss ($10,000)Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value. If Model AE2 is dropped from the product line, operating income will: a increase by $10,000 b decrease by $20,000 c increase by $30,000 d decrease by $10,000

b decrease by $20,000

Ratzlaff Company has a current production level of 20,000 units per month. Current monthly sales are 18,000 units. Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each. Current sales would NOT be affected by the one-time-only special order, and variable marketing/distribution costs would NOT be incurred on the special order. What is Ratzlaff Company's change in operating profits if the special order is accepted? Unit costs at this level are:  direct materials- .25 direct labor- .40 variable overhead- .15 fixed overhead- .20 marketing fixed- .20 marketing variable- .40 a $400 increase in operating profits b $400 decrease in operating profits c $1,800 increase in operating profits d $1,800 decrease in operating profits

c $1,800 increase in operating profits

Genent's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials $46,000 Direct labor 11,500 Variable overhead costs 34,500 Fixed overhead costs 23,000 Total costs $115,000It is estimated that 8% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Genent's Engine Company has the option of purchasing the part from an outside supplier at $97.75 per unit.If Genent's Engine Company purchases 1,000 TE456 parts from the outside supplier per month, then its monthly operating income will: a increase by $3,910 b increase by $19,090 c decrease by $3,910 d decrease by $19,090

c decrease by $3,910

Pizza For Everyone 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:If Pizza For Everyone replaces the existing delivery van with the new one, the cash outflows: decrease by $37,500 increase by $37,500 decrease by $7,500 increase by $7,500

decrease by $7,500