Question :
61. A business received an offer from an exporter for 10,000 : 1233928
61. A business received an offer from an exporter for 10,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:
Domestic unit sales price
$20
Unit manufacturing costs:
Variable
13
Fixed
1
What is the amount of gain or loss from acceptance of the offer? A. $30,000 gainB. $40,000 lossC. $30,000 lossD. $20,000 loss
62. A business received an offer from an exporter for 20,000 units of product at $15 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:
Domestic unit sales price
$21
Unit manufacturing costs:
Variable
12
Fixed
5
What is the differential cost from the acceptance of the offer? A. $120,000B. $240,000C. $300,000D. $420,000
63. A business received an offer from an exporter for 20,000 units of product at $15 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:
Domestic unit sales price
$21
Unit manufacturing costs:
Variable
12
Fixed
5
What is the amount of the gain or loss from acceptance of the offer? A. $35,000 lossB. $40,000 gainC. $60,000 gainD. $50,000 gain
64. Relevant revenues and costs focus on: A. activities that occurred in the pastB. monies already earned and/or spentC. last year’s net incomeD. differences between the alternatives being considered
65. Assume that Darrow Co. is considering disposing of equipment that cost $50,000 and has $40,000 of accumulated depreciation to date. Darrow Co. can sell the equipment through a broker for $25,000 less 5% commission. Alternatively, Minton Co. has offered to lease the equipment for five years for a total of $48,750. Darrow will incur repair, insurance, and property tax expenses estimated at $10,000. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is: A. $15,000B. $ 5,000C. $25,000D. $12,500
66. Frank Co. is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $5 a unit. The unit cost for Frank Co. to make the part is $6, which includes $.40 of fixed costs. If 4,000 units of the part are normally purchased each year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease for making the part rather than purchasing it? A. $12,000 cost decreaseB. $20,000 cost increaseC. $20,000 cost decreaseD. $2,400 cost increase
67. Franklin and Johnson, CPAs, currently work a five-day week. They estimate that net income for the firm would increase by $45,000 annually if they worked an additional day each month. The cost associated with the decision to continue the practice of a five-day work week is an example of: A. differential revenueB. sunk costC. differential incomeD. opportunity cost
68. Benson Co. is considering disposing of a machine with a book value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased at a cost of $25,000. It will have a useful life of five years and no residual value. It is estimated that variable manufacturing costs will be reduced from $26,000 to $23,500 if the new machine is purchased. The total net differential increase or decrease in cost for the new equipment for the entire five years is: A. decrease of $11,000B. decrease of $15,000C. increase of $11,000D. increase of $15,000
69. Sorrentino Inc. is considering disposing of a machine with a book value of $22,500 and an estimated remaining life of three years. The old machine can be sold for $6,250. A new machine with a purchase price of $68,750 is being considered as a replacement. It will have a useful life of three years and no residual value. It is estimated that variable manufacturing costs will be reduced from $43,750 to $20,000 if the new machine is purchased. The net differential increase or decrease in cost for the entire three years for the new equipment is: A. $8,750 increaseB. $31,250 decreaseC. $8,750 decreaseD. $2,925 decrease
70. Dary Co. Produces a single product. Its normal selling price is $28 per unit. The variable costs are $18 per unit. Fixed costs are $20,000 for a normal production run of 5,000 units per month. Dary received a request for a special order that would not interfere with normal sales. The order was for 1,500 units and a special price of $17.50 per unit. Dary Co. has the capacity to handle the special order and, for this order, a variable selling cost of $2 per unit would be eliminated. If the order is accepted, what would be the impact on net income? A. decrease of $750B. decrease of $6,750C. increase of $2,250D. increase of $1,500
