Question : 72.Element Boards makes skateboard wheels. Budget information regarding the current : 1302810

 

 

72.Element Boards makes skateboard wheels. Budget information regarding the current period is given below:

Revenue (200,000 wheels at $3.00)                            $600,000

Direct materials                            120,000

Direct labor                            220,000

Variable manufacturing overhead                            50,000

Fixed manufacturing overhead                                70,000

 

The USA Skate Team has approached Element with a special order for 6,000 wheels at a price of $2.75 per wheel. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company’s orders. However, Element is operating at capacity and will incur an additional $5,000 in fixed manufacturing overhead if the order is accepted. What is the incremental cost associated with accepting the special order?

A.$16,500

B.$11,700

C.$18,800

D.$16,700

 

73.Element Boards makes skateboard wheels. Budget information regarding the current period is given below:

Revenue (200,000 wheels at $3.00)                            $600,000

Direct materials                            120,000

Direct labor                            220,000

Variable manufacturing overhead                            50,000

Fixed manufacturing overhead                                70,000

 

The USA Skate Team has approached Element with a special order for 6,000 wheels at a price of $2.75 per wheel. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company’s orders. However, Element is operating at capacity and will incur an additional $5,000 in fixed manufacturing overhead if the order is accepted. What is the incremental income (loss) associated with accepting the special order?

A.($2,300)

B.$2,700

C.($2,700)

D.($200)

 

74.P&T Furniture has a capacity to produce 40,000 oak shelves per year and is currently selling 36,000 shelves for $32 each. Bates Hotel has approached P&T about buying 1,200 shelves for a new hotel it is building and is willing to pay $26 for each shelf. The shelves can be packaged in bulk, saving P&T $1.50 per shelf compared to the normal packaging cost. Normally, the shelves have a unit variable cost of $27. The annual fixed costs of $450,000 will be unaffected by the special order and it will not affect any of its other operations. What would be the impact on profits if P&T accepts this special order?

A.Profits will decrease by $6,000.

B.Profits will increase by $31,200.

C.Profits will increase by $600.

D.Profits will decrease by $1,200.

75.P&T Furniture has a capacity to produce 40,000 oak shelves per year and is currently selling all 40,000 shelves for $32 each. Bates Hotel has approached P&T about buying 1,200 shelves for a new hotel it is building and is willing to pay $26 each. The shelves can be packaged in bulk, saving P&T $1.50 per shelf compared to the normal packaging cost. Normally, the shelves have a unit variable cost of $27. The annual fixed costs of $450,000 will be unaffected by the special order and it will not affect any of its other operations. What is the minimum price per shelf that P&T should accept for this special order?

A.$27.00

B.$25.50

C.$30.50

D.$32.00

 

76.Accent Furniture has a capacity of 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Bank has approached Accent for buying 800 chairs for only $210 each. Accent has a normal variable cost of $165 per chair, including $50 per unit in direct labor per chair. Accent can produce the special order on an overtime shift. This would result in direct labor being paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and it will not affect any of its other operations. What will be the impact on profits of accepting the order?

A.Profit will decrease by $24,000.

B.Profit will increase by $16,000.

C.Profit will increase by $36,000.

D.Profit will decrease by $4,000.

 

77.Tenna Electronics sells arc monitors for $55 per unit. Unit product costs are as follows:

 

Direct materials              $14

Direct labor              20

Manufacturing overhead                  3

Total              $37

 

A special order to purchase 15,000 arc monitors was recently received from a customer. There is enough capacity to fill the order and filling this order would not disrupt current operations. Tenna will incur an additional $2 per arc monitor for additional labor costs due to a slight modification the buyer wants made to the original product. One-third of the manufacturing overhead costs is fixed and will be incurred no matter how many units are produced. In negotiating a price, how much is the minimum selling price that Tenna Electronics should accept for this special order?

A.$34

B.$39

C.$38

D.$36

 

78.Why is cost-plus pricing criticized?

A.It includes selling and administrative costs in determining the product cost.

B.It does not consider the fixed manufacturing overhead in determining the product cost.

C.It is inherently circular for manufacturing firms.

D.It requires a high level of technical expertise to price products using this method.

 

79.To what amount does a company set a price equal if it uses a cost-plus approach to pricing?

A.Total costs incurred

B.Variable product costs plus a markup for profit

C.Estimated total costs plus a markup for profit

D.Total variable costs plus a share of the fixed costs

 

80.Sky Blue Plans provides financial planning for senior citizens. The costs of preparing 800 financial plans in the prior year were:

Direct labor              $400,000

Variable overhead              296,000

Fixed overhead                250,000

Total cost              $946,000

 

At the start of the current year, the company received an offer from MooseHaven, a retirement home for Moose members. MooseHaven wants Sky Blue Plans to prepare financial plans for its 150 assisted living citizens. Sky Blue has the capacity to prepare up to 1,000 plans in a given year, so this special order would not take away revenue from any of Sky Blue’s current clients. MooseHaven is willing to pay $880 per plan. What will be the effect on Sky Blue Plan’s profit if it agrees to prepare plans for the 150 citizens of MooseHaven?

A.Profit will increase by $1,500.

B.Profit will decrease by $45,375.

C.Profit will increase by $132,000.

D.Profit will decrease by $1,500.

 

81.Which of the following is not a valid criticism of cost-plus pricing?

A.It is difficult to determine the appropriate markup.

B.The method depends on technical expertise in determining a cost.

C.The firm’s demand curve is ignored in setting the price and quantity.

D.The method is inherently circular for manufacturing firms.