Question :
21. Averette & AveretteAverette & Averette, a local dental practice, currently : 1291723
21. Averette & AveretteAverette & Averette, a local dental practice, currently makes its own dentures for customers. The dental practice has one part-time employee who comes in weekly to make dentures. The employee is paid $150 per denture set. The direct materials and variable overhead cost per set of dentures is $75 and $25, respectively. In addition, the practice allocates $10,000 of fixed overhead to the denture-making department. The practice makes 1,000 sets of dentures per year. An outside company who specializes in the making of dentures has offered to make each set of dentures for Averette & Averette for $255 per set. Refer to the Averette & Averette information above. If Averette & Averette outsources the making of dentures, the net income will: A. decrease by $15,000.B. increase by $5,000.C. increase by $15,000.D. decrease by $5,000.
22. Henderson Manufacturing Inc.Henderson Manufacturing Inc. manufactures electric scooters. The company currently makes all of the electronic components for the scooter itself. When 10,000 motors are manufactured each year, the motor costs per unit are as follows:
Direct materials
$5
Direct labor
5
Variable overhead
2
Fixed overhead
7
Plymouth Inc. has offered to sell Henderson 10,000 motors for $14 per unit. If Henderson accepts the offer, 50% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Henderson Manufacturing Inc. information above. What are the relevant costs per unit of Henderson manufacturing the motors themselves? A. $15.50B. $15.20C. $19.00D. $14.00
23. Henderson Manufacturing Inc.Henderson Manufacturing Inc. manufactures electric scooters. The company currently makes all of the electronic components for the scooter itself. When 10,000 motors are manufactured each year, the motor costs per unit are as follows:
Direct materials
$5
Direct labor
5
Variable overhead
2
Fixed overhead
7
Plymouth Inc. has offered to sell Henderson 10,000 motors for $14 per unit. If Henderson accepts the offer, 50% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Henderson Manufacturing Inc. information above. If Henderson accepts the offer to purchase 6,000 motors from Plymouth, the net income will: A. decrease by $9,000.B. increase by $10,000.C. decrease by $10,000.D. increase by $9,000.
24. Compton Products Inc.Compton Products Inc. manufactures humidifiers. The company currently makes all of the electronic components for the humidifier itself. When 10,000 units are manufactured each year, the motor costs per unit are as follows:
Direct materials
$6
Direct labor
8
Variable overhead
7
Fixed overhead
9
McClintock Inc. has offered to sell Compton 10,000 motors for $25 per unit. If Compton accepts the offer, 75% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Compton Products Inc. information above. What are the relevant costs per unit of Compton making the motors themselves? A. $21.00B. $23.25C. $27.75D. $30.00
25. Compton Products Inc.Compton Products Inc. manufactures humidifiers. The company currently makes all of the electronic components for the humidifier itself. When 10,000 units are manufactured each year, the motor costs per unit are as follows:
Direct materials
$6
Direct labor
8
Variable overhead
7
Fixed overhead
9
McClintock Inc. has offered to sell Compton 10,000 motors for $25 per unit. If Compton accepts the offer, 75% of the fixed overhead currently allocated to the motors could be avoided. Refer to the Compton Products Inc. information above. If Compton accepts the offer to purchase 10,000 motors from McClintock, the net income will: A. increase by $27,500.B. decrease by $17,500.C. increase by $50,000.D. decrease by $40,000.
26. In the decision on whether or not to drop an unprofitable product line, the product line will most likely be dropped if: A. all of the product line’s fixed costs are unavoidable.B. the product line’s total fixed costs are less than the contribution margin lost from dropping the product line.C. the contribution margin lost from dropping the product line is less than the fixed costs avoided from dropping the product line.D. the contribution margin lost from dropping the product line is more than the fixed costs avoided from dropping the product line.
27. A particular product line should not be dropped if: A. its total fixed costs are more than its contribution margin.B. its avoidable fixed costs are less than its contribution margin.C. its unavoidable fixed costs are more than its contribution margin.D. its variable costs are more than its fixed costs.
28. Laurel Inc. has three product lines: A, B, and C.
A
B
C
Total
Sales
$20,000
$35,000
$22,000
$77,000
Variable costs
8,000
10,000
14,000
32,000
Contribution margin
12,000
25,000
8,000
45,000
Fixed costs
4,000
11,000
9,000
24,000
Net income
$ 8,000
$14,000
$ (1,000)
$21,000
Management is considering dropping product line C. If it is discontinued, one-half of its fixed costs can be avoided. The discontinuation of product line C would: A. decrease net income by $3,500.B. increase net income by $1,000.C. decrease net income by $12,500.D. increase net income by $4,500.
29. Tremaine Inc. has three product lines: A, B, and C.
A
B
C
Total
Sales
$55,000
$90,000
$95,000
$240,000
Variable costs
37,000
40,000
45,000
122,000
Contribution margin
18,000
50,000
50,000
118,000
Fixed costs
23,000
20,000
30,000
73,000
Net income
$(5,000)
$30,000
$20,000
$ 45,000
Management is considering dropping product line A. If it is discontinued, $14,000 of its fixed costs can be avoided. The discontinuation of product line A would: A. decrease net income by $15,000.B. increase net income by $21,000.C. decrease net income by $4,000.D. increase net income by $4,000.
30. Carlton Products has three product lines: A, B, and C.
A
B
C
Total
Sales
$500,000
$550,000
$700,000
$1,750,000
Variable costs
280,000
420,000
300,000
1,000,000
Contribution margin
220,000
130,000
400,000
750,000
Fixed costs
100,000
140,000
150,000
390,000
Net income
$120,000
$ (10,000)
$250,000
$ 360,000
Management is considering dropping product line B. If it is discontinued, all of its fixed costs can be avoided. The discontinuation of product line B would: A. decrease net income $10,000.B. increase net income $140,000.C. decrease net income $130,000.D. increase net income $10,000.
