Question :
40.Product A requires 5 machine hours per unit to be : 1258728
40.Product A requires 5 machine hours per unit to be produced, Product B requires only 3 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.
41.Epsilon Co. can produce a unit of product for the following costs:
Direct material$8
Direct labor24
Overhead 40
Total costs per unit $72
An outside supplier offers to provide Epsilon with all the units it needs at $60 per unit. If Epsilon buys from the supplier, the company will still incur 40% of its overhead. Epsilon should choose to:
A. Buy since the relevant cost to make it is $72.
B. Make since the relevant cost to make it is $56.
C. Buy since the relevant cost to make it is $48.
D. Make since the relevant cost to make it is $48.
E. Buy since the relevant cost to make it is $56.
42.Factor Co. can produce a unit of product for the following costs:
Direct material$8
Direct labor24
Overhead 40
Total costs per unit $72
An outside supplier offers to provide Factor with all the units it needs at $46 per unit. If Factor buys from the supplier, the company will still incur 60% of its overhead. Factor should choose to: A. Buy since the relevant cost to make it is $56.
B. Make since the relevant cost to make it is $48.
C. Buy since the relevant cost to make it is $48.
D. Make since the relevant cost to make it is $32.
E. Buy since the relevant cost to make it is $32.
43.Listmann Corp. processes four different products that can either be sold as is or processed further. Listed below are sales and additional cost data:
ProductSales Value with no further ProcessingAdditional Processing CostsSales Value after further processing
Premier$1,350$900 $2,700
Deluxe450225630
Super9004501,800
Basic90 45 180
A. Premier.
B. Deluxe.
C. Super.
D. Basic.
E. Premier and Basic.
44.Maxim manufactures a hamster food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $1.80 and total fixed costs are $10,000. The hamster food can be sold as it is for $9.00 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,000 cost. The additional processing will yield 10,000 bags of Premium Green and 3,000 bags of Green Deluxe, which can be sold for $8 and $6 per bag, respectively. The net advantage (incremental income) of processing Green Health further into Premium Green and Green Deluxe would be:
A. $98,000.
B. $96,000.
C. $8,000.
D. $6,000.
E. $2,000.
45.Maxim manufactures a cat food product called Green Health. Maxim currently has 10,000 bags of Green Health 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 $9.00 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,000 cost. The additional processing will yield 10,000 bags of Premium Green and 3,000 bags of Green Deluxe, which can be sold for $8 and $6 per bag, respectively. If Green Health is processed further into Premium Green and Green Deluxe, the total gross profit would be:
A. $68,000.
B. $78,000.
C. $96,000.
D. $98,000.
E. $100,000.
46.Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor 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 $3.00 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. 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.
47.Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor 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 $3.00 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. If Minor 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 units.
C. 1,125 units.
D. 625 units.
E. 300 units.
48.Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3 per unit. Bluebird currently produces and sells 75,000 units at $7.00 each. This level represents 80% of its capacity. Production costs for these units are $3.50 per unit, which includes $2.25 variable cost and $1.25 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:
A. $45,000 increase.
B. $11,250 increase.
C. $33,750 increase.
D. $7,500 decrease.
E. $33,750 decrease.
49.Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units follows:
Direct material$45,000
Direct labor30,000
Factory overhead (30% is variable)98,000
If Bannister can buy 1,000 units from a subcontractor for $100,000, it should:
A. Make the product because current factory overhead is less than $100,000.
B. Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000.
C. Buy the product because the total incremental costs of manufacturing are greater than $100,000.
D. Buy the product because total fixed and variable manufacturing costs are greater than $100,000.
E. Make the product because factory overhead is a sunk cost.
