Question : 71. Altertech Inc. manufactures a product that contains a circuit : 1256769

 

 

71. Altertech Inc. manufactures a product that contains a circuit board. The company has always purchased this circuit board from a supplier for $32 each. Altertech recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the circuit board instead of buying it. The company prepared the following per unit cost projections of making the circuit board, assuming that overhead is allocated to the part at the normal predetermined overhead rate of 110% of direct labor cost. 

Direct materials

$2

Direct labor

20

Overhead (fixed and variable)

22

Total

$44

The required volume of output to produce the circuit boards will not require any incremental fixed overhead. Incremental variable overhead cost is $3 per circuit board. What is the effect on income if Altertech decides to make the circuit boards?A.  Income will decrease by $7 per unit.B.  Income will increase by $7 per unit.C.  Income will increase by $12 per unit.D.  Income will decrease by $12 per unit.E.  Income will increase by $10 per unit.

 

 

72. Wave-Zone Company has 10,000 units of its sole product that it produced last year at a cost of $50 each. This year’s model is superior to last year’s and the 10,000 units cannot be sold for their regular selling price of $75 each. Wave-Zone has two alternatives for these items: (1) they can be sold to a wholesaler for $5 each, or (2) they can be reworked at a total cost of $190,000 and then sold for $22.50 each. The company has enough idle capacity to rework these items without affecting any new production. Which choice would increase the company’s profits the most?A.  Reworking, because profit will increase by $35,000 more than scrapping.B.  Scrapping, because profit will increase by $50,000 more than reworking.C.  Reworking, because profit will increase by $15,000 more than scrapping.D.  Scrapping, because profit will increase by $15,000 more than reworking.E.  Reworking because profit will increase by $50,000 more than scrapping.

 

 

73. Sandlewood Company has 15,000 units of its sole product that it produced last year at a cost of $43 each. This year’s model is superior to last year’s and the 15,000 units cannot be sold for their regular selling price of $80 each. Sandlewood has two alternatives for these items: (1) they can be sold to a wholesaler for $30 each, or (2) they can be reworked at a total cost of $400,000 and then sold for $60 each. The company has enough idle capacity to rework these items without affecting any new production. Which choice would increase the company’s profits the most?A.  Reworking, because profit will increase by $500,000 more than scrapping. B.  Scrapping, because profit will increase by $450,000 more than reworking. C.  Reworking, because profit will increase by $50,000 more than scrapping. D.  Scrapping, because profit will increase by $50,000 more than reworking.E.  Reworking because profit will increase by $450,000 more than scrapping.

 

 

74. Roxie Company has 17,500 units of its sole product that it produced last year at a cost of $45 each. This year’s model is superior to last year’s and the 17,500 units cannot be sold for their regular selling price of $80 each. Roxie has two alternatives for these items: (1) they can be sold to a wholesaler for $35 each, or (2) they can be reworked at a total cost of $450,000 and then sold for $60 each. The company has enough idle capacity to rework these items without affecting any new production. Which choice would increase the company’s profits the most?A.  Reworking, because profit will increase by $600,000 more than scrapping.B.  Scrapping, because profit will increase by $612,500 more than reworking.C.  Reworking, because profit will increase by $12,500 more than scrapping.D.  Scrapping, because profit will increase by $12,500 more than reworking.E.  Reworking because profit will increase by $450,000 more than scrapping.

 

 

75. A company has already incurred a $12,000 cost in partially producing its two products. Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing. Based on this information, should any products be processed further? 

 

 

Product

 

Unfinished Selling Price

 

Finished Selling Price

Further Processing Costs

A

$700

$775

$65

B

800

888

89

A.  Both product A and product B should be processed further.B.  Neither product A nor product B should be processed further.C.  Only product B should be processed further.D.  Only product A should be processed further.E.  A processing further decision cannot be made from the available data.

 

 

76. A company has already incurred a $24,000 cost in partially producing its two products. Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing. Based on this information, should any products be processed further? 

 

 

Product

 

Unfinished Selling Price

 

Finished Selling Price

Further Processing Costs

A

$900

$1,000

$65

B

600

675

76

A.  Both product A and product B should be processed further.B.  Neither product A nor product B should be processed further.C.  Only product B should be processed further.D.  Only product A should be processed further.E.  A processing further decision cannot be made from the available data.

 

 

 

77. A company has already incurred a $15,000 cost in partially producing its three products. Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing. Based on this information, should any products be processed further? 

 

 

Product

 

Unfinished Selling Price

 

Finished Selling Price

Further Processing Costs

A

$750

$   875

$130

B

850

1,000

155

C

950

1,200

255

A.  All of these products should be processed further.B.  None of these products should be processed further.C.  Only product A should be processed further.D.  Only product B should be processed further.E.  Only product C should be processed further.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78. A company has already incurred a $55,000 cost in partially producing its three products. Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing. Based on this information, should any products be processed further? 

 

 

Product

 

Unfinished Selling Price

 

Finished Selling Price

Further Processing Costs

A

$72

$108

$35

B

83

124

42

C

94

141

45

A.  All of these products should be processed further.B.  None of these products should be processed further.C.  Products A and B should be processed further.D.  Products B and C should be processed further.E.  Products A and C should be processed further.

 

 

 

79. Bandy Corporation owns a machine that manufactures lawn games. Production time for the croquet set is 10 units per hour and for the volley ball game is 8 units per hour. The machine’s capacity is 1,500 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,000 croquet sets and 10,000 volleyball games. Selling prices and variable costs per unit are shown below. Based on this information, what is Bandy Corporation’s most profitable sales mix? 

 

Croquet Set

Volleyball Game

Selling price per unit

$75

$62

Variable costs per unit

42

25

A.  15,000 croquet sets.B.  12,000 volleyball games.C.  4,000 croquet sets and 10,000 volleyball games.D.  4,000 croquet sets and 8,800 volleyball games.E.  2,500 croquet sets and 10,000 volleyball games.

 

 

80. The Mad Hatter Company owns a machine that manufactures two types of chimney caps. Production time is .20 hours for cap A and .40 hours for cap B. The machine’s capacity is 2,000 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 1,000 units of cap A and 6,000 units of cap B. Selling prices and variable costs per unit are shown below. Based on this information, what is the Mad Hatter’s most profitable sales mix? 

 

Cap A

Cap B

Selling price per unit

$80

$60

Variable costs per unit

53

42

A.  10,000 units of cap A.B.  5,000 units of cap B.C.  1,000 units of cap A and 5,000 units of cap B.D.  1,000 units of cap A and 6,000 units of cap B.E.  1,000 units of cap A and 4,500 units of cap B.