Question :
51. Alpha Co. can produce a unit of Beta for the : 1225724
51. Alpha Co. can produce a unit of Beta for the following costs:
An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit. If Alpha buys from the supplier, Alpha will still incur 40% of its overhead. Alpha should:
A. Buy Beta since the relevant cost to make it is $72.
B. Make Beta since the relevant cost to make it is $56.
C. Buy Beta since the relevant cost to make it is $48.
D. Make Beta since the relevant cost to make it is $48.
E. Buy Beta since the relevant cost to make it is $56.
52. Marcus processes four different products that can either be sold as is or processed further.
Listed below are sales and additional cost data:
Which product(s) should not be processed further?
A. Acta.
B. Corda.
C. Fando.
D. Limo.
E. None of the products should be processed further.
53. Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export 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 Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively. The net advantage (incremental income) of processing Special Export further into Prime and Feline Surprise would be:
A. $98,000.
B. $96,000.
C. $8,000.
D. $6,000.
E. $2,000.
54. Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export 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 Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively. If Special Export is processed further into Prime Cat Food and Feline Surprise, the total gross profit would be:
A. $68,000.
B. $78,000.
C. $96,000.
D. $98,000.
E. $100,000.
55. Parker Plumbing has received a special one-time order for 1,500 faucets (units) at $5 per unit. Parker 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.
56. Parker Plumbing has received a special one-time order for 1,500 faucets (units) at $5 per unit. Parker 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 Parker 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.
57. Textel is thinking about having one of its products manufactured by a subcontractor.
Currently, the cost of manufacturing 1,000 units follows:
If Textel 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.
58. A company has the choice of either selling 1,000 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $4.00 per unit. Alternatively, it could rebuild them with incremental costs of $1.00 per unit for materials, $2.00 per unit for labor, and $1.50 per unit for overhead, and then sell the rebuilt units for $8.00 each. What should the company do?
A. Sell the units as scrap.
B. Rebuild the units.
C. It does not matter because both alternatives have the same result.
D. Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently.
E. Throw the units away.
59. Thompson Company had the following results of operations for the past year:
A foreign company (whose sales will not affect Thompson’s market) offers to buy 4,000 units at $7.50 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $600 and selling and administrative costs by $300. If Thompson accepts the offer, its profits will:
A. Increase by $30,000.
B. Increase by $6,000.
C. Decrease by $6,000.
D. Increase by $5,200.
E. Increase by $4,300.
60. The break-even time (BET) method is a variation of the:
A. Payback method.
B. Internal rate of return method.
C. Accounting rate of return method.
D. Net present value method.
E. Present value method.
