Question :
60.Cornish Company had the following results of operations for the : 1258730
60.Cornish Company had the following results of operations for the past year:
Sales (20,000 units at $22) $440,000
Direct materials and direct labor$200,000
Overhead (40% variable)100,000
Selling and administrative expenses (all fixed) 92,000 (392,000)
Operating income $48,000
A foreign company (whose sales will not affect Cornish’s market) offers to buy 3,000 units at $17.00 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $500 and selling and administrative costs by $1,000. If Cornish accepts the offer, its profits will:
A. Decrease by $4,500.
B. Increase by $4,500.
C. Decrease by $300.
D. Increase by $13,500.
E. Increase by $15,000.
61.Elliot Company can sell all of its products A and Z that it can produce, but it has limited production capacity. It can produce 8 units of A per hour or 10 units of Z per hour, and it has 20,000 production hours available. Contribution margin per unit is $12 for A and $10 for Z. What is the most profitable sales mix for Elliot Company?
A. 84,000 units of A and 60,000 units of Z.
B. 48,000 units of A and 80,000 units of Z.
C. 60,000 units of A and 100,000 units of Z.
D. 120,000 units of A and 0 units of Z.
E. 0 units of A and 200,000 units of Z.
62.Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,050,000 and the variable costs were $860,000. The fixed costs of the division were $193,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
A. $57,900 decrease
B. $132,100 decrease
C. $54,900 decrease
D. $190,000 increase
E. $190,000 decrease
63.Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,000. The division sales for the year were $960,000 and the variable costs were $475,000. The fixed costs of the division were $527,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield’s operating income for eliminating this business segment would be:
A. $485,000 decrease
B. $210,800 increase
C. $274,200 decrease
D. $485,000 increase
E. $274,200 increase
64.Granfield Company has a piece of manufacturing equipment with a book value of $40,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $22,000. Granfield can purchase a new machine for $120,000 and receive $22,000 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $19,000 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:
A. $22,000 decrease
B. $76,000 increase
C. $18,000 decrease
D. $52,000 increase
E. $22,000 increase
65.Beta Inc. can produce a unit of Zed for the following costs:
Direct material$10
Direct labor20
Overhead 50
Total costs per unit$80
An outside supplier offers to provide Beta with all the Zed units it needs at $58 per unit. If Beta buys from the supplier, it will still incur 40% of its overhead. Beta should: A. Buy Zed since the relevant cost to make it is $60.
B. Make Zed since the relevant cost to make it is $60.
C. Buy Zed since the relevant cost to make it is $80.
D. Make Zed since the relevant cost to make it is $30.
E. Buy Zed since the relevant cost to make it is $30.
66.To determine a product selling price based on the total cost method, management should include:
A. Total production and nonproduction costs plus a markup.
B. Total production and nonproduction costs only.
C. Total production costs plus a markup.
D. Total nonproduction costs plus a markup.
E. Only a markup.
67.Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit?
A. Total cost times markup percentage.
B. Total cost per unit times markup percentage per unit.
C. Total cost per unit divided by markup percentage per unit.
D. Markup percentage per unit divided by total cost per unit.
E. Markup percentage divided by total cost.
68.Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units per year. A customer has offered to buy an additional 20,000 units at $32 each and sell them outside the country so as not to compete with Wade. The following data are available:
Costs at 75% capacity:Per UnitTotal
Direct materials$12.00$1,260,000
Direct labor9.00945,000
Overhead (fixed and variable) 15.00 1,575,000
Totals $36.00$3,780,000
In producing 20,000 additional units, fixed overhead costs would remain at their current level but incremental variable overhead costs of $6 per unit would be incurred. What is the effect on income if Wade accepts this order?
A. Income will decrease by $4 per unit.
B. Income will increase by $4 per unit.
C. Income will increase by $5 per unit.
D. Income will decrease by $5 per unit.
E. Income will increase by $11 per unit.
69.Derby Inc. manufactures a product which contains a small part. The company has always purchased this motor from a supplier for $125 each. Derby recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the motor instead of buying it. The company prepared the following per unit cost projections of making the motor, assuming that overhead is allocated to the part at the normal predetermined overhead rate of 150% of direct labor cost.
Direct materials$38
Direct labor50
Overhead (fixed and variable) 75
Total$163
The required volume of output to produce the motors will not require any incremental fixed overhead. Incremental variable overhead cost is $21 per motor. What is the effect on income if Derby decides to make the motors? A. Income will decrease by $16 per unit.
B. Income will increase by $16 per unit.
C. Income will increase by $23 per unit.
D. Income will decrease by $23 per unit.
E. Income will increase by $39 per unit.
