Question :
91. Truckel, Inc. currently manufactures a wicket as its main : 1311773
91. Truckel, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows:
Direct materials and direct labor$11
Variable overhead5
Fixed overhead 8
Total$24
Saran Company has contacted Truckel with an offer to sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets, variable costs are $16 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Truckel make or buy the wickets?
a.Buy; savings = $15,000
b.Buy; savings = $5,000
c.Make; savings = $10,000
d.Make; savings = $5,000
92. Galley Industries can produce 100 units of a necessary component part with the following costs:
Direct Materials$20,000
Direct Labor9,000
Variable Overhead21,000
Fixed Overhead8,000
If Galley Industries purchases the component externally, $2,000 of the fixed costs can be avoided. Below what external price for the 100 units would Galley choose to buy instead of make?
a.$50,000
b.$56,000
c.$44,000
d.$52,000
93. Which decision will involve no incremental revenues?
a.Make or buy decision
b.Drop a product line
c.Accept a special order
d.Additional processing decision
94. An opportunity cost
a.should be initially recorded as an asset.
b.is the cost of a new product proposal.
c.is the potential benefit that may be obtained by following an alternative course of action.
d.is classified as manufacturing overhead.
95. Opportunity cost must be considered in decisions involving
a.budgeting.
b.financial accounting.
c.CVP analysis.
d.resources that have alternative uses.
96. The opportunity cost of an alternate course of action that is relevant to a make-or-buy decision is
a.subtracted from the “Make” costs.
b.added to the “Make” costs.
c.added to the “Buy” costs.
d.none of these.
97. Opportunity cost is usually
a.a standard cost.
b.a potential benefit.
c.a sunk cost.
d.included as part of cost of goods sold.
98. Each of the following is a disadvantage of buying rather than making a component of a company’s product except that
a.quality control specifications may not be met.
b.the outside supplier could increase prices significantly in the future.
c.profitable product lines may be dropped.
d.the supplier may not deliver on time.
99. Tex’s Manufacturing Company can make 100 units of a necessary component part with the following costs:
Direct Materials$120,000
Direct Labor25,000
Variable Overhead45,000
Fixed Overhead30,000
If Tex’s Manufacturing Company purchases the component externally, $20,000 of the fixed costs can be avoided. At what external price for the 100 units is the company indifferent between making or buying?
a.$190,000
b.$200,000
c.$210,000
d.$220,000
100.Tex’s Manufacturing Company can make 100 units of a necessary component part with the following costs:
Direct Materials$120,000
Direct Labor25,000
Variable Overhead45,000
Fixed Overhead30,000
If Tex’s Manufacturing Company can purchase the component externally for $190,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
a.Buy and save $5,000
b.Make and save $5,000
c.Make and save $15,000
d.Buy and save $15,000
