Question : 81.              In a make-or-buy decision, which costs can be considered : 1311772

 

 

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

a.Unavoidable variable costs, incremental fixed costs, and sunk costs

b.Incremental variable costs, unavoidable fixed costs, and opportunity costs

c.Incremental variable costs, incremental fixed costs, and sunk costs

d.Incremental variable costs, incremental fixed costs, and opportunity costs

 

 

82.              Billings Company has the following costs when producing 100,000 units:

Variable costs$600,000

Fixed costs900,000

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

a.$285,000.

b.$315,000.

c.$(15,000).

d.$840,000.

 

 

83.              Sandusky Inc. has the following costs when producing 100,000 units:

Variable costs$600,000

Fixed costs900,000

An outside supplier is interested in producing the item for Sandusky. If the item is produced outside, Sandusky could use the released production facilities to make another item that would generate $150,000 of net income. At what unit price would Sandusky accept the outside supplier’s offer if Sandusky wanted to increase net income by $120,000?

a.$8.70

b.$6.30

c.$7.50

d.$5.70

 

 

84.              Which statement is true concerning the decision rule on whether to make or buy?

a.The company should buy if the cost of buying is less than the cost of producing.

b.The company should buy if the incremental revenue exceeds the incremental costs.

c.The company should buy as long as total revenue exceeds present revenues.

d.The company should buy assuming no additional fixed costs are incurred.

 

 

85.              Which one of the following does not affect a make-or-buy decision?

a.Variable manufacturing costs

b.Opportunity costs

c.Incremental revenue

d.Direct labor

 

 

86.              During 2012, it cost Westa, Inc. $18 per unit to produce part T5. During 2013, it has increased to $21 per unit. In 2013, Southside Company has offered to provide Part T5 for $16 per unit to Westa. As it pertains to the make-or-buy decision, which statement is true?

a.Differential costs are $5 per unit.

b.Incremental costs are $2 per unit.

c.Net relevant costs are $2 per unit.

d.Incremental revenues are $3 per unit.

 

87.              Chapman Company manufactures widgets. Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $125,000 for 100,000 units. Chapman 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 materials$  46,500

Direct labor43,500

Manufacturing overhead    60,000

Total$150,000

The manufacturing overhead consists of $24,000 of costs that will be eliminated if the components are no longer produced by Chapman. From Chapman’s point of view, how much is the incremental cost or savings if the widgets are bought instead of made?

a.$25,000 incremental savings

b.$11,000 incremental cost

c.$11,000 incremental savings

d.$25,000 incremental cost

 

 

88.              The cost to produce Part A was $20 per unit in 2012. During 2013, it has increased to $23 per unit. In 2013, Supplier Company has offered to supply Part A for $18 per unit. For the make-or-buy decision,

a.incremental revenues are $5 per unit.

b.incremental costs are $3 per unit.

c.net relevant costs are $3 per unit.

d.differential costs are $5 per unit.

 

 

89.              Max Company uses 20,000 units of Part A in producing its products. A supplier offers to make Part A for $7. Max Company has relevant costs of $8 a unit to manufacture Part A. If there is excess capacity, the opportunity cost of buying Part A from the supplier is

a.$0.

b.$20,000.

c.$140,000.

d.$160,000.

 

 

90.              Truckel, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows:

Direct materials and direct labor$11

Variable overhead5

Fixed overhead  8

Total$24

 

The fixed overhead is an allocated common cost. How much is the relevant cost of the wicket?

a.$36

b.$24

c.$19

d.$16