Question :
58.Watson Wheels currently makes 6,000 wheels annually that used in : 1302788
58.Watson Wheels currently makes 6,000 wheels annually that are used in other products it manufactures. Current unit costs for the wheels are as follows:
Direct materials $22.00
Direct labor 16.00
Variable manufacturing overhead 12.00
Fixed manufacturing overhead 15.00
Total $65.00
The company has an offer from a manufacturer to produce the wheels for $60 per wheel.If the company decides to buy the wheels, the empty warehouse space could be rented for $22,000 annually. In addition, half of the fixed manufacturing overhead costs would be avoided if the company decides to buy the wheels. If the company decides to accept the offer, what is the incremental effect on the company’s net income?
A.A savings of $7,000
B.A savings of $37,000
C.A decrease in net income of $15,000
D.An increase in net income of $52,000
59.Trebecker Construction plans to discontinue its roofing segment which last year generated a contribution margin of $65,000 and incurred $70,000 in fixed costs. If the segment is discontinued, half of the fixed costs will be avoided. What effect is expected to occur to the company’s overall profit?
A.A decrease of $5,000
B.A decrease of $30,000
C.A decrease of $5,000
D.An increase of $30,000
60.Tannimen Square has 800 obsolete calculators in its inventory which have a cost of $16 each. If the calculators are reworked they could be sold for $23 each. If sold ‘as-is’, the revenue would be only $12 each. If Tannimen decides to rework the calculators, how much should the company be willing to invest to ensure that no additional loss occurs on the sale of the calculators?
A.$5,600
B.$8,800
C.$0
D.$3,200
61.Blue Chip Company sells gears for $9 per unit. The unit cost of each gear follows:
Direct materials $1.50
Direct labor 2.20
Manufacturing overhead 2.10
Total $5.80
An order to purchase 4,000 gears was recently received from a new customer. There is enough capacity to fill the order and filling this order would not disrupt current operations. Blue Chip Company would incur an additional $1.80 per gear for shipping costs. Half of the manufacturing overhead costs are fixed and would be incurred no matter how many units are produced. In negotiating a price, how much is the minimum acceptable selling price?
A.$7.60
B.$5.80
C.$4.75
D.$6.55
62.Conviser Tools manufactures a number of products from the same raw material. Joint processing costs total $10,000. Product A could be sold at the cut-off point for $18,000 or it can be further processed at a cost of $9,000 and then sold for $35,000. Conviser should:
A.Further process product A because its incremental revenues will exceed incremental costs by $8,000.
B.Further process product A because its incremental revenues will exceed incremental costs by $26,000.
C.Sell as-is because the incremental loss is $2,000 if processed further.
D.Further process product A because its incremental revenues will exceed incremental costs by $16,000.
63.Barnett Brass sells economy door knobs for $15 each. Unit product costs are as follows:
Direct materials $3
Direct labor 2
Manufacturing overhead 4
Total $9
An order to purchase 4,000 units was recently received from a new customer. There is enough capacity to fill the order and filling this order would not disrupt current operations. Barnett Brass would incur an additional $1.50 per unit for shipping costs. Thirty percent of the manufacturing overhead costs are fixed and would be incurred no matter how many units are produced. In negotiating a price, how much is the minimum acceptable selling price?
A.$10.50
B.$7.80
C.$9.30
D.$7.70
64.Meehan Giftsmanufactures a number of products from the same raw material. Joint processing costs total $4,000. Product Z could be sold at the cut-off point for $6,000 or it can be further processed at a cost of $9,000 and then sold for $14,000. MeehanCompany should
A.sell product Z at the split-off point because its incremental costs will exceed incremental revenues by $5,000 than if processed further.
B.further process product Z because its incremental revenues will exceed incremental costs by $1,000 with this option.
C.sell product Z at the split-off point because its incremental costs will exceed incremental revenues by $1,000 than if processed further.
D.sell product Z at the split-off point because its incremental costs will exceed incremental revenues by $5,000than if processed further.
65.B&B Flooring produced 8,000 yards of its economy-grade carpet. In the coloring process, there was a pigment defect and the resulting color faded. The carpet normally sells for $18 per yard, with $6 of variable cost per yard and $3 of fixed cost per yard assigned to the carpet. The company realizes that it cannot sell the faded carpet for $18 per yard through its normal channels, unless the coloring process is repeated. The incremental cost of the coloring process is $4 per yard. Ace Apartments is willing to buy the carpet in its current faded condition for $13 per yard. Should B&B repeat the coloring process or sell the carpet to Ace Apartments?
A.Repeat coloring for $8,000 benefit
B.Sell ‘as is’ to Ace for $32,000 benefit
C.Repeat coloring for $56,000 benefit
D.Sell ‘as is’ to Ace for $56,000 benefit
66.Foot Print has three product lines in its retail stores: shoes, boots, and sandals. The allocated fixed costs are based on units sold and are unavoidable. Results of June follow:
SocksBootsSandalsTotal
Units sold8001,2002,4004,400
Revenue$24,800$30,400$36,600$91,800
Variable costs13,60013,20016,80043,600
Direct fixed costs5,0007,0006,50018,500
Allocated fixed costs8,0009,0008,00025,000
Net income (loss)$(1,800) $1,200$ 5,300$4,700
Demand of individual products is not affected by changes in other product lines. How much is the incremental effecton income of dropping socks?
A.Decrease of $11,200
B.Decrease of $6,200
C.Increase of $1,800
D.Decrease of $1,500
67.Deep South Dairy gathered the following data about the two products that it produces:
Current SalesEstimated AddedSales Value if
ProductValueProcessing CostsProcessed Further
Milk $8,000 $2,000 $11,000
Yogurt 12,000 7,000 18,000
Which of the products should be processed further?
A.Milk, because profits increase by $1,000, whereas Yogurt results indecrease ofprofit
B.Yogurt, because profits increase by $1,000, which exceeds the profits increasedbyMilk
C.Both products, because revenue will increase by $9,000 for Milk, and by $6,000 for Yogurt
D.Both products, because profits for Milk will be $1,000, and profit for Yogurt will be $1,000
