Question : 63.The Fine Point Company currently produces all of the components : 1259664

 

 

63.The Fine Point Company currently produces all of the components for its one product; an electric pencil sharpener. The unit cost of manufacturing the motor for this pencil sharpener is:  The company is considering the possibility of buying this motor from a subcontractor and has been quoted a price of $3.60 per unit. The relevant cost of manufacturing the motor to be considered in reaching the decision is:   

A. $4.75.

 

B. $4.15.

 

C. $3.55.

 

D. $4.05.

 

 

 

64.Aircraft Products, a manufacturer of aircraft landing gear, makes 1,000 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $70 and fixed costs of $60. The valves could be purchased from an outside supplier at $77 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company’s operating income to:   

A. Increase by $26,000.

 

B. Increase by $17,000.

 

C. Decrease by $9,000.

 

D. Decrease by $29,000.

 

 

 

Perry’s Cycle Company manufactures annually 20,000 units of TushSeat, a bicycle seat used on many of the company’s products, and also sold directly to retailers for $38 per unit. At the current level of production, the cost per unit to produce TushSeat consists of:  It has come to the attention of management that a seat of similar quality can be purchased from outside suppliers.

 

65.Refer to the information above. Assume that Perry’s fixed costs remain unchanged if the seats are purchased from an outside supplier. In order to operate more profitably by buying the seats rather than manufacturing them, Perry must negotiate a price per unit from the outside supplier that is less than:   

A. $27.

 

B. $25.

 

C. $22.

 

D. $23.

 

 

 

66.Refer to the information above. Assume that seats can be purchased from the outside supplier at $25 each, and that 60% of total fixed costs incurred in producing TushSeat will be eliminated by this strategy. Buying the seats instead of manufacturing them would cause Perry’s operating income to:   

A. Decrease by $20,000.

 

B. Increase by $36,000.

 

C. Increase by $16,000.

 

D. Decrease by $24,000.

 

 

 

 

67.Refer to the information above. If Creative Star Corporation has an unlimited supply of wood available, which products should it produce?   

A. Royal only.

 

B. Classic and Royal.

 

C. Royal and Standard.

 

D. Classic only.

 

 

 

 

68.Refer to the information above. If Creative Star Corporation has a limited supply of wood available, which products should it produce?   

A. Royal only.

 

B. Classic and Royal.

 

C. Royal and Standard.

 

D. Classic only.

 

 

 

 

69.Refer to the information above. If Creative Star Corporation has only 250,000 square yards of wood available, what is the highest total amount of fixed cost the company can incur and still break-even?   

A. $2,500,000.

 

B. $4,000,000.

 

C. $5,000,000.

 

D. $6,000,000.

 

 

 

 

70.Refer to the information above. Which of the following statements is false regarding the defective units?   

A. BT&T will not recover its costs if it sells the defective units as scrap.

 

B. BT&T will recover total costs incurred if it reworks the defective units.

 

C. BT&T will not recover its costs if it reworks the defective units.

 

D. BT&T will recover more of its additional costs if it decides to rework the defective units.

 

 

 

 

71.Refer to the information above. If BT&T reworks the defective telephones, by how much will its operating income change?   

A. Increase by $500.

 

B. Decrease by $1,600.

 

C. Increase by $5,500.

 

D. Decrease by $6,500.

 

 

72.Refer to the information above. Joint costs allocated to product A1 total:   

A. $8,800.

 

B. $13,500.

 

C. $13,200.

 

D. $22,000.