Question : 41. Product A requires five machine hours per unit to : 1256766

 

 

41. Product A requires five machine hours per unit to be produced, Product B requires only three machine hours per unit, and the company’s productive capacity is limited to 240,000 machine hours. Product A sells for $16 per unit and has variable costs of $6 per unit. Product B sells for $12 per unit and has variable costs of $5 per unit. Assuming the company can sell as many units of either product as it produces, the company should:A.  Produce only Product A.B.  Produce only Product B.C.  Produce equal amounts of A and B.D.  Produce A and B in the ratio of 62.5% A to 37.5% B.E.  Produce A and B in the ratio of 40% A and 60% B.

 

 

 

 

 

42. Product X requires 10 machine hours per unit to be produced, Product Y requires only 6 machine hours per unit, and the company’s productive capacity is limited to 240,000 machine hours. Product A sells for $32 per unit and has variable costs of $12 per unit. Product B sells for $24 per unit and has variable costs of $7 per unit. Assuming the company can sell as many units of either product as it produces, the company should:A.  Produce only Product X.B.  Produce only Product Y.C.  Produce equal amounts of  X and Y.D.  Produce X and Y in the ratio of 62.5% X to 37.5% Y.E.  Produce X and Y in the ratio of 40% X and 60% Y.

  

43. Alpha Co. can produce a unit of Beta for the following costs: 

Direct material

$  8

Direct labor

24

Overhead

40

Total costs per unit

$72

 

 

An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit. If Alpha buys from the supplier, Alpha will still incur 40% of its overhead. Alpha should:A.  Buy Beta since the relevant cost to make it is $72.B.  Make Beta since the relevant cost to make it is $56.C.  Buy Beta since the relevant cost to make it is $48.D.  Make Beta since the relevant cost to make it is $48.E.  Buy Beta since the relevant cost to make it is $56.

 

 

 

 

 

 

 

 

 

 

44. Beta Inc. can produce a unit of Zed for the following costs: 

Direct material

$  10

Direct labor

20

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.

 

 

 

45. Marcus processes four different products that can either be sold as is or processed further.Listed below are sales and additional cost data: 

 

 

 

 

 

Sales Value

 

Sales

 

with No Further

Additional

Processing

Value after

Further

Product

Processing

Costs

Processing

Acta

$1,350

$900

$2,700

Corda

450

225

630

Fando

900

450

1,800

Limo

90

45

180

Which product(s) should not be processed further? A.  Acta.B.  Corda.C.  Fando.D.  Limo.E.  None of the products should be processed further.

 

Reference: 23_01

Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag are $1.80 and total fixed costs are $10,000. The cat food can be sold as it is for $9 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively.

 

 

46. The net advantage (incremental income) of processing Special Export further into Prime and Feline Surprise would be:A.  $98,000B.  $96,000C.  $8,000D.  $6,000E.  $2,000

 

 

47. If Special Export is processed further into Prime Cat Food and Feline Surprise, the total gross profit would be:A.  $68,000B.  $78,000C.  $96,000D.  $98,000E.  $100,000

 

 

Reference: 23_02

Parker Plumbing has received a special one-time order for 1,500 faucets (units) at $5 per unit. Parker currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production.

 

 

48. Should the company accept the special order?A.  No, because additional production would exceed capacity.B.  No, because incremental costs exceed incremental revenue.C.  Yes, because incremental revenue exceeds incremental costsD.  Yes, because incremental costs exceed incremental revenuesE.  No, because the incremental revenue is too low.

 

 

 

49. If Parker wishes to earn $1,250 on the special order, the size of the order would need to be:A.  4,500 units.B.  2,250 unitsC.  1,125 unitsD.  625 unitsE.  300 units

 

 

Reference: 23_03

Teague Plumbing has received a special one-time order for 1,500 toilets (units) at $75 per unit. Teague currently produces and sells 7,500 units at $100 each. This level represents 75% of its capacity. Production costs for these units are $75 per unit, which includes $70 variable cost and $5 fixed cost. To produce the special order, shipping costs of $10,000 will be incurred. Management expects no other changes in costs as a result of the additional production.

 

 

50. Should the company accept the special order?A.  No, because additional production would exceed capacity.B.  No, because incremental costs exceed incremental revenue.C.  Yes, because incremental revenue exceeds incremental costs.D.  Yes, because incremental costs exceed incremental revenues.E.  No, because the incremental revenue is too low.