Question :
11. JNR Products produces and sells plastic soda cups with specialized : 1295615
11. JNR Products produces and sells plastic soda cups with specialized logos on the front. They sell the cups in batches of 500 for $125 per batch. The company has the capacity to produce 100 batches per month but averages much less. When 75 batches are sold a month, each batch has $40 worth of variable costs and $5 worth of fixed overhead costs allocated to it. The company has been approached by a local fireman’s association who wishes to purchase three batches of cups for $50 per batch. If the special order were accepted, net income would: A. increase by $10.B. decrease by $225.C. increase by $15.D. increase by $30.
12. Collegiate Products produces and sells padded stadium seats emblazoned with a university logo. The company has the capacity to produce as many as 6,000 seats per month but consistently averages much less. When 4,500 seats are produced, each seat has $5 of variable costs and $2 of fixed overhead costs allocated to it. The seats typically sell for $25 each. The company has been approached by a small college who wishes to purchase 500 seats for special alumni at a price of $5 per seat. If the special order were accepted, net income would: A. decrease by $1,000.B. increase by $2,500.C. decrease by $12,500.D. not change.
13. Vertical integration: A. is achieved when a company acquires many of its competitors.B. is accomplished when a company is involved in multiple steps in the value chain.C. is rarely attempted due to the risks involved.D. ensures that the highest quality products are produced at the lowest possible price.
14. When are fixed costs relevant in a make or buy decision? A. Fixed costs are never relevant to the decision.B. Fixed costs are relevant when they differ among alternatives.C. Fixed costs are always relevant to the decision.D. Fixed costs are relevant when they exceed variable costs.
15. Which of the following is not a consideration associated with outsourcing? A. The effect on employees.B. The effect on vertical integration.C. The effect on unavoidable fixed costs.D. The effect on variable costs.
16. Which of the following statements is true when a company is considering whether or not to make or buy (outsource) a component of a product that it currently manufactures? A. If none of the current fixed overhead is avoidable when outsourcing, the product should be made internally.B. If the current fixed overhead is avoidable when outsourcing, the product should be outsourced.C. If the relevant costs to make internally are greater than the relevant costs of outsourcing, the product should be outsourced.D. If the cost of outsourcing is greater than the direct materials cost of making internally, the product should continue to be made internally.
17. Speed Quest Inc. manufactures speed boats. Currently, the company manufactures its own engine for the boats at the following unit costs:
Direct materials
$ 25.00
Direct labor
$ 40.00
Variable overhead
$ 15.00
Fixed overhead
$ 20.00
Another manufacturer has offered to supply Speed Quest with the engine at a cost of $85 each. Speed Quest currently makes 1,000 boats annually. If Speed Quest accepts the offer, what will be the short-term impact on net income? A. Decrease of $5,000.B. Increase of $15,000.C. Decrease of $85,000.D. Increase of $20,000.
18. Quinton Products manufactures digital cameras. Currently, the company manufactures its own carrying case for the cameras at the following unit costs:
Direct materials
$ 2.00
Direct labor
$ 2.00
Variable overhead
$ 1.00
Fixed overhead
$ 1.00
Another manufacturer has offered to supply Quinton with the case at a cost of $6 each. Quinton currently makes 9,000 cases annually. If Quinton accepts the offer, what will be the short-term impact on net income? A. No impact on net income.B. Decrease by $9,000.C. Increase by $9,000.D. Decrease by $18,000.
19. Averette & Averette, a local dental practice, currently makes its own dentures for customers. The dental practice has one part-time employee who comes in weekly to make dentures. The employee is paid $150 per denture set. The direct materials and variable overhead cost per set of dentures is $75 and $25, respectively. In addition, the practice allocates $10,000 of fixed overhead to the denture-making department. The practice makes 1,000 sets of dentures per year. An outside company who specializes in the making of dentures has offered to make each set of dentures for Averette & Averette for $255 per set. Refer to the Averette & Averette information above. What are Averette & Averette’s total relevant costs to make the dentures themselves? A. $150B. $250C. $260D. $100
20. Averette & Averette, a local dental practice, currently makes its own dentures for customers. The dental practice has one part-time employee who comes in weekly to make dentures. The employee is paid $150 per denture set. The direct materials and variable overhead cost per set of dentures is $75 and $25, respectively. In addition, the practice allocates $10,000 of fixed overhead to the denture-making department. The practice makes 1,000 sets of dentures per year. An outside company who specializes in the making of dentures has offered to make each set of dentures for Averette & Averette for $255 per set. Refer to the Averette & Averette information above. If Averette & Averette outsources the making of dentures, net income will: A. decrease by $15,000.B. increase by $5,000.C. increase by $15,000.D. decrease by $5,000.
