Question : 11) Smiley Face Company manufactures signs from direct materials to : 1211762

11) Smiley Face Company manufactures signs from direct materials to the finished product. This is considered ________.

A) insourcing

B) outsourcing

C) right-shoring

D) fragmentation

12) Which of the following would be considered in a make-or-buy decision?

A) fixed costs that will no longer be incurred

B) prepaid rent expense for warehousing finished goods and inventories

C) potential rental income from space occupied by the production area

D) unchanged supervisory costs

Answer the following questions using the information below:

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 labor11,500

Variable overhead costs34,500

Fixed overhead costs23,000

Total costs$115,000

It 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.

13) If Genent’s Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total ________.

A) $93,840

B) $92,000

C) $115,000

D) $116,840

14) 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

15) The maximum price that Genent’s Engine Company should be willing to pay the outside supplier is

________.

A) $92 per TE456 part

B) $93.84 per TE456 part

C) $115 per TE456 part

D) $116.84 per TE456 part

16) If Talium Services Inc. does not use one of its limited resources in the best possible way, the lost contribution to income could be called a(n) ________.

A) business function cost

B) carrying cost

C) opportunity cost

D) sunk cost

17) Opportunity costs is defined as ________.

A) the cost of manufacturing a one-time-only special order when a firm has excess capacity to make more products

B) the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use

C) the sum of variable and fixed costs in a particular business function of the value chain, such as manufacturing costs or marketing costs

D) the sum of variable and fixed costs in all business functions of the value chain, such as manufacturing costs or marketing costs

18) Which of the following is true of an opportunity cost?

A) It is the income foregone by not using a resource in an alternative way.

B) The higher the opportunity costs, the lower is the relevant cost.

C) It is recorded as an expense in the accounting records.

D) It is an unavoidable cost that cannot be changed no matter what action is taken.

19) Which of the following would be a consideration in a make-or-buy decision?

A) excess capacity

B) wages to CEO

C) marketing costs

D) audit expenses

20) If a company has excess capacity, the most it would pay for buying a product that it currently makes would be the ________.

A) total variable cost of producing the product

B) full cost of producing the product

C) total cost of producing the product

D) business function cost of the product