Question :
51. A business operating at 90% of capacity and currently purchasing : 1239640
51. A business is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit. The unit cost for the business to make the part is $20, including fixed costs, and $12, not including fixed costs. If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?
A. $150,000 cost increase
B. $ 90,000 cost decrease
C. $150,000 cost increase
D. $ 90,000 cost increase
52. A business is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36, including fixed costs, and $28, not including fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?
A. $60,000 cost decrease
B. $180,000 cost increase
C. $60,000 cost increase
D. $180,000 cost decrease
53. The amount of income that would result from an alternative use of cash is called:
A. differential income
B. sunk cost
C. differential revenue
D. opportunity cost
54. Pheasant Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $60 per pound and would require an additional cost of $24 per pound to produce. What is the differential cost of producing Product C?
A. $30 per pound
B. $24 per pound
C. $28 per pound
D. $60 per pound
55. Partridge Co. can further process Product J to produce Product D. Product J is currently selling for $21 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $9.25 per pound to produce.
What is the differential cost of producing Product D?
A. $6.50 per pound
B. $9.25 per pound
C. $17 per pound
D. $5.25 per pound
56. Partridge Co. can further process Product J to produce Product D. Product J is currently selling for $21 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $9.25 per pound to produce.
What is the differential revenue of producing Product D?
A. $6.75 per pound
B. $9.25 per pound
C. $17 per pound
D. $5.25 per pound
57. Quail Co. can further process Product B to produce Product C. Product B is currently selling for $60 per pound and costs $42 per pound to produce. Product C would sell for $92 per pound and would require an additional cost of $13 per pound to produce. What is the differential revenue of producing and selling Product C?
A. $32 per pound
B. $42 per pound
C. $50 per pound
D. $18 per pound
58. Raven Company is considering replacing equipment which originally cost $500,000 and which has $420,000 accumulated depreciation to date. A new machine will cost $790,000. What is the sunk cost in this situation?
A. $370,000
B. $790,000
C. $80,000
D. $290,000
59. Raptor Company is considering replacing equipment which originally cost $500,000 and which has $420,000 accumulated depreciation to date. A new machine will cost $790,000 and the old equipment can be sold for $8,000. What is the sunk cost in this situation?
A. $72,000
B. $80,000
C. $88,000
D. $290,000
60. A business is considering a cash outlay of $250,000 for the purchase of land, which it could lease for $35,000 per year. If alternative investments are available which yield an 18% return, the opportunity cost of the purchase of the land is:
A. $35,000
B. $45,000
C. $10,000
D. $6,300
