Question :
111.Pratt Company has old inventory hand that cost $15,000. Its : 1311775
111.Pratt Company has old inventory on hand that cost $15,000. Its scrap value is $20,000. The inventory could be sold for $50,000 if manufactured further at an additional cost of $15,000. What should Pratt do?
a.Sell the inventory for $20,000 scrap value
b.Dispose of the inventory to avoid any further decline in value
c.Hold the inventory at its $15,000 cost
d.Manufacture further and sell it for $50,000
112.New Age Makeup produces face cream. Each bottle of face cream costs $10 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. New Age Makeup could sell the sunscreen bottles for $23 each.
a.Face cream must be processed further because its profit is $9 each.
b.Face cream must not be processed further because costs increase more than revenue.
c.Face cream must not be processed further because it decreases profit by $1 each.
d.Face cream must be processed further because it increases profit by $3 each.
113.Janssen Company has old inventory on hand that cost $24,000. Its scrap value is $32,000. The inventory could be sold for $80,000 if manufactured further at an additional cost of $24,000. What should Janssen do?
a.Sell the inventory for $32,000 scrap value
b.Dispose of the inventory to avoid any further decline in value
c.Hold the inventory at its $24,000 cost
d.Manufacture further and sell it for $80,000.
114.A company has a process that results in 24,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $160,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?
a.Process further, the company will be better off by $16,000.
b.Sell now, the company will be better off by $16,000.
c.Process further, the company will be better off by $144,000.
d.Sell now, the company will be better off by $160,000.
115.The decision rule on whether to sell or process further
a.varies from situation to situation.
b.is process further as long as total revenue exceeds present revenues.
c.is process further if incremental revenue from such processing exceeds incremental fixed costs.
d.is process further if incremental revenue from such processing exceeds the incremental processing costs.
116.Eddy Company is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Eddy Company would sell it for $135. The cost to assemble the product is estimated at $27 per unit and Eddy Company believes the market would support a price of $174 on the assembled unit. What is the correct decision using the sell or process further decision rule?
a.Sell before assembly, the company will be better off by $27 per unit.
b.Sell before assembly, the company will be better off by $39 per unit.
c.Process further, the company will be better off by $39 per unit.
d.Process further, the company will be better off by $12 per unit.
117.Mallory Company manufactures widgets. Bowden Company has approached Mallory with a proposal to sell the company widgets at a price of $82,000 for 100,000 units. Mallory is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced:
Direct material$ 31,000
Direct labor29,000
Manufacturing overhead 40,000
Total$100,000
The manufacturing overhead consists of $16,000 of costs that will be eliminated if the components are no longer produced by Mallory. From Mallory’s point of view, how much is the incremental cost or savings if the widgets are bought instead of made?
a.$18,000 incremental savings
b.$6,000 incremental cost
c.$2,000 incremental savings
d.$18,000 incremental cost
118.The focus of a sell or process further decision is
a.incremental revenue.
b.incremental cost.
c.both incremental revenue and incremental cost.
d.neither incremental revenue nor incremental cost.
119.Marcus Company gathered the following data about the three products that it produces:
PresentEstimated AdditionalEstimated Sales
ProductSales Value Processing Costs if Processed Further
A$12,000$8,000$21,000
B14,0005,00018,000
C11,0003,00016,000
Which of the products should not be processed further?
a.Product A
b.Product B
c.Product C
d.Products A and C
120.Serene Dairy has four product lines: sour cream, ice cream, yogurt, and butter. The total cost of producing the milk base for the products is $45,000, which has been allocated based on the gallons of milk base used by each product. Results for July follow:
Sour CreamIce CreamYogurtButterTotal
Units sold2,0005004002,0004,900
Revenue$10,000$20,000$10,000$20,000$60,000
Variable departmental costs6,00013,0004,2004,80028,000
Fixed costs 5,000 2,000 3,000 7,000 17,000
Net income (loss)$ (1,000)$ 5,000$ 2,800$ 8,200$15,000
How much are total joint costs of the products?
a.$28,000
b.$17,000
c.$45,000
d.$15,000
