Question : 53. Products which emerge from a shared manufacturing process referred to : 1229594

53. Products which emerge from a shared manufacturing process are referred to as: 
A. Complementary products.
B. Joint products.
C. Contributory products.
D. Codependent products.

Burns Industries currently manufactures and sells 20,000 power saws per month, although it has the capacity to produce 35,000 units per month. At the 20,000-unit-per-month level of production, the per-unit cost is $65, consisting of $40 in variable costs and $25 in fixed costs. Burns sells its saws to retail stores for $80 each. Allen Distributors has offered to purchase 5,000 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs.

54. Which of the following is not a relevant factor in Burns’ decision concerning whether to accept the special order from Allen? 
A. The opportunity cost involved in accepting Allen’s order.
B. The incremental cost of manufacturing an additional 5,000 saws per month.
C. The $65 average cost per unit to manufacture a power saw.
D. Where and at what price Allen intends to sell the saws.

55. Assume that Allen Distributors offers to purchase the additional 5,000 saws at a price of $47 per unit. If Burns accepts this price, Burns’ monthly gross profit on sales of power saws will: 
A. Increase by $35,000.
B. Increase by $185,000.
C. Decrease by $40,000.
D. Decrease by $240,000.

56. Using an incremental analysis approach, Burns should consider accepting this special order only if the price per unit offered by Allen is at least: 
A. $20.
B. $50.
C. $80.
D. $40.

57. Burns decides to accept the special order for 5,000 units from Allen at a unit sales price that will add $100,000 per month to its operating income. The unit price Burns is charging Allen is: 
A. $20.80.
B. $60.00.
C. $62.50.
D. $55.00.

John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below:
  
Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors.

58. If Joan Reid’s order is rejected, what will be John Boyd ‘s average unit cost of manufacturing each motor? 
A. $68.
B. $70.
C. $96.
D. Some other amount.

59. What is the incremental cost of producing each additional motor? 
A. $29.
B. $69.
C. $95.
D. Some other amount.

60. Assuming John Boyd wants to earn a pretax profit of $10,000 on this special order, what price must it charge Joan Reid? 
A. $69.
B. $83.
C. $95.
D. Some other amount.

JCN Industries normally produces and sells 5,000 keyboards for personal computers each month. Variable manufacturing costs amount to $25 per unit, and fixed costs are $146,000 per month. The regular sales price of the keyboards is $86 per unit. JCN has been approached by a foreign company that wants to purchase an additional 1,000 keyboards per month at a reduced price. Filling this special order would not affect JCN’s regular sales volume or fixed manufacturing costs.

61. On the basis of the above information only, which of the following is not true? 
A. At the 5,000-unit level of production, JCN’s average cost per unit is $54.20.
B. At the 6,000-unit level of production, JCN’s average cost per unit is $49.33.
C. It would not be profitable for JCN to consider the special order at a price less than $49 per unit.
D. Neither the fixed manufacturing costs of $146,000 nor the variable manufacturing costs of $25 per unit is relevant to this decision regarding the special order.

62. Assume that the price offered by the foreign company is $43 per unit. Accepting the special order will cause JCN’s operating income to: 
A. Increase by $18,000.
B. Decrease by $2,000.
C. Decrease by $33,000.
D. Decrease by $35,000.