Question :
51)
Audio Labs collected the following information the cost of producing : 1196068
51)
Audio Labs collected the following information on the cost of producing 20,000 speaker units:
Direct materials$32.00 per unit
Direct labour4.00 per unit
Variable overhead16.00 per unit
Fixed overhead -8.00 per unit
(purchasing, receiving, and setups)
Fixed overhead – amortization12.00 per unit
Cartunes has offered to sell Audio the speakers for $64.00 each.
Audio Labs has an option to make 10,000 CD units to sell to Stereo Sound Studios. The parts would be sold at $64.00 each. Costs incurred in production include:
Direct materials$24.00 per unit
Direct labour4.00 per unit
Variable overhead (power, utilities)16.00 per unit
Should Audio Labs make or buy the parts if the facilities remain idle when speakers are purchased? 51)
______ A)
make, save $4.00 per unit B)
buy, save $4.00 per unit C)
make, save $2.00 per unit D)
buy, save $2.00 per unit E)
make, save $6.00 per unit
52)
When considering a project that will require production using otherwise idle resources, which of the following are TRUE? 52)
______ A)
Only the variable costs of the project are relevant. B)
Avoidable fixed costs are irrelevant. C)
The project should not be undertaken if total revenue from the project is
less than the total costs of production. D)
In the short run, even if revenue is less than the total costs of production, the project could help the company’s overall operating income. E)
Only financial factors should be considered.
53)
Which of the following is False concerning opportunity costs? 53)
______ A)
They are seldom incorporated into formal financial accounting reports. B)
They are irrelevant for the make/buy decision. C)
They do not entail cash disbursements. D)
They do not entail cash receipts. E)
They do not require accounting journal entries.
54)
If Harry, Inc. doesn’t use one of its limited resources in the best possible way, the lost contribution to income could be called 54)
______ A)
a total alternative cost. B)
an alternative cost. C)
a resource cost. D)
an opportunity cost. E)
a constraining factor.
55)
A company has two manufacturing facilities, one in Alberta that produces a bulk chemical that it sells to many different retailers, and one facility in Ontario that is dedicated to producing a specialty chemical for one client only.
The annual profit from the single client is $150,000, and the profit from the other facility’s sales is $1,500,000, after
allocating combined fixed costs based on units produced.
Another company has offered to lease the Ontario facilities for $250,000. Which of the following is TRUE? 55)
______ A)
Incremental costs exceed incremental revenues if the plant is rented. B)
The $250,000 is an opportunity cost of continuing to use the Ontario plant. C)
The company needs to determine the contribution margin for each product before making any decision. D)
Incremental revenues exceed total costs if the plant is rented. E)
The company incurred a $250,000 opportunity cost for the past years, but this was not recorded on its books.
56)
Central Medical Supply, Inc., a manufacturer of medical testing equipment, has $240,000 worth of an obsolete line of testing equipment. The obsolete equipment can be adapted to fit another line of testing equipment at a cost of $64,000; the market value would then be $136,000. However, Tripac offered to purchase the obsolete equipment as is for $88,000.
What is the opportunity cost associated with the adaptation of the equipment to another line of testing equipment assuming Central accepts Tripac’s offer? 56)
______ A)
$240,000 B)
$136,000 C)
$72,000 D)
$88,000 E)
none of the above
57)
The greatest possible contribution margin per unit of the constraining factor will ensure which of the following? 57)
______ A)
minimum total variable costs B)
maximum operating income C)
zero imputed costs D)
minimum fixed cost per unit of production E)
minimum variable costs per unit of production
58)
Decisions on product mix involving multiple products, should be based on which of the following? 58)
______ A)
the variable cost differential between the products B)
individual product contribution margin totals C)
the amount of idle capacity D)
fixed cost savings E)
the differential selling prices between the products
59)
Last year, a sailboard company produced two types of boards, a regular board for multi-purpose sailing, and a special trick board used by experts for competitions.
The regular board sells for $750 and the competition board sells for $1,350.
The variable production costs are $250 and $400 respectively, and the company has $400,000 in fixed costs overall.
Marketing staff have determined that the company should specialize in the competition boards only, and sell the regular boards, if at all,
under a different brand name
Last year the company made a profit, selling twice as many regular boards as competition boards, resulting in a fixed cost allocation of $5.00 per board.
It takes 6 hours of direct labour to make a regular board and 12 hours to make a competition board.
The company worked at full capacity of 19,500 direct labour hours last year.
Based on the above information only, which product or mix of products, should the company choose?
Assume that any and all production can be sold. 59)
______ A)
any combination is equivalent, based on the contribution margin times the number of boards that could be sold B)
the regular board only, as it takes fewer direct labour hours to build C)
the regular board only, as it has the highest contribution margin per direct labour hour D)
both as the company made a profit last year using this strategy E)
the competition board only, as it has a higher contribution margin
60)
Companies periodically confront decisions about discontinuing or adding branches or business segments.
In order to determine the best course of action, a ________ should be performed in order to make the optimal decision. 60)
______ A)
relevant risk assessment B)
relevant-risks and relevant-loss analysis C)
relevant-revenue and relevant-cost analysis D)
relevant feasibility study E)
relevant capital and relevant cash flow analysis
