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Question;31. A;study has been conducted to determine if Product A should be dropped. Sales of;the product total $200,000 per year, variable expenses total $140,000 per year.;Fixed expenses charged to the product total $90,000 per year. The company;estimates that $40,000 of these fixed expenses will continue even if the;product is dropped. These data indicate that if Product A is dropped, the;company's overall net operating income would;A.;decrease by $20,000 per year;B.;increase by $20,000 per year;C.;decrease by $10,000 per year;D.;increase by $30,000 per year;32.;The Kelsh Company has two;divisions--North and South. The divisions have the following revenues and;expenses;Management;at Kelsh is pondering the elimination of North Division. If North Division were;eliminated, its traceable fixed expenses could be avoided. The total common;corporate expenses would be unaffected. Given these data, the elimination of;North Division would result in an overall company net operating income of;A.;$100,000;B.;$150,000;C.;$(140,000);D.;$50,000;33.;Power Systems Inc. manufactures;jet engines for the United States armed forces on a cost-plus basis. The;production cost of a particular jet engine is shown below;If production of this engine was;discontinued, the production capacity would be idle, and the supervisor would;be laid off. The depreciation referred to above is for special equipment that;would have no resale value and that does not wear out through use. When asked;to bid on the next contract for this engine, the minimum unit price that Power;Systems should bid is;A.;$408,000;B.;$365,000;C.;$397,000;D.;$385,000;34.;The management of Heider;Corporation is considering dropping product J14V. Data from the company's;accounting system appear below;In;the company's accounting system all fixed expenses of the company are fully;allocated to products. Further investigation has revealed that $211,000 of the;fixed manufacturing expenses and $172,000 of the fixed selling and;administrative expenses are avoidable if product J14V is discontinued. What;would be the effect on the company's overall net operating income if product;J14V were dropped?;A.;Overall net operating income would;decrease by $55,000.;B.;Overall net operating income would;increase by $160,000.;C.;Overall net operating income would;increase by $55,000.;D.;Overall net operating income would;decrease by $160,000.;35. Product;R19N has been considered a drag on profits at Buzzeo Corporation for some time;and management is considering discontinuing the product altogether. Data from;the company's accounting system appear below;In;the company's accounting system all fixed expenses of the company are fully;allocated to products. Further investigation has revealed that $49,000 of the;fixed manufacturing expenses and $30,000 of the fixed selling and administrative;expenses are avoidable if product R19N is discontinued. What would be the;effect on the company's overall net operating income if product R19N were;dropped?;A.;Overall net operating income would;decrease by $59,000.;B.;Overall net operating income would;decrease by $22,000.;C.;Overall net operating income would;increase by $59,000.;D.;Overall net operating income would;increase by $22,000.;36.;Lusk Company produces and sells 15,000 units of;Product A each month. The selling price of Product;A is;$20 per unit, and variable expenses are $14 per unit. A study has been made;concerning whether Product A should be discontinued. The study shows that;$70,000 of the $100,000 in fixed expenses charged to Product A would continue;even if the product was discontinued. These data indicate that if Product A is;discontinued, the company's overall net operating income would;A.;decrease by $60,000 per month;B.;increase by $10,000 per month;C.;increase by $20,000 per month;D.;decrease by $20,000 per month;37. Peluso;Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity.;Peluso's plant manager is considering making the headlights now being purchased;from an outside supplier for $11 each. The Peluso plant has idle equipment that;could be used to manufacture the headlights. The design engineer estimates that;each headlight requires $4 of direct materials, $3 of direct labor, and $6.00;of manufacturing overhead. Forty percent of the manufacturing overhead is a;fixed cost that would be unaffected by this decision. A decision by Peluso;Company to manufacture the headlights should result in a net gain (loss) for;each headlight of;A.;$(2.00);B.;$1.60;C.;$0.40;D.;$2.80;38.;Part I51 is used in one of Pries;Corporation's products. The company makes 18,000 units of this part each year.;The company's Accounting Department reports the following costs of producing;the part at this level of activity;An;outside supplier has offered to produce this part and sell it to the company;for $15.80 each. If this offer is accepted, the supervisor's salary and all of;the variable costs, including direct labor, can be avoided. The special;equipment used to make the part was purchased many years ago and has no salvage;value or other use. The allocated general overhead represents fixed costs of;the entire company. If the outside supplier's offer were accepted, only $26,000;of these allocated general overhead costs would be avoided.;If;management decides to buy part I51 from the outside supplier rather than to;continue making the part, what would be the annual impact on the company's;overall net operating income?;A.;Net operating income would decline by $81,800 per;year.;B.;Net operating income would decline;by $55,800 per year.;C.;Net operating income would decline;by $119,800 per year.;D.;Net operating income would decline;by $29,800 per year.;39. Iwasaki;Inc. is considering whether to continue to make a component or to buy it from;an outside supplier. The company uses 13,000 of the components each year. The;unit product cost of the component according to the company's cost accounting;system is given as follows;Assume;that direct labor is a variable cost. Of the fixed manufacturing overhead, 30%;is avoidable if the component were bought from the outside supplier. In;addition, making the component uses 1 minute on the machine that is the;company's current constraint. If the component were bought, this machine time;would be freed up for use on another product that requires 2 minutes on this;machine and that has a contribution margin of $5.20 per unit.;When deciding whether to;make or buy the component, what cost of making the component should be compared;to the price of buying the component?;A.;$22.40;B.;$19.80;C.;$17.28;D.;$19.88;40.;Part N29 is used by Farman;Corporation to make one of its products. A total of 11,000 units of this part;are produced and used every year. The company's Accounting Department reports;the following costs of producing the part at this level of activity;An;outside supplier has offered to make the part and sell it to the company for;$21.20 each. If this offer is accepted, the supervisor's salary and all of the;variable costs, including the direct labor, can be avoided. The special;equipment used to make the part was purchased many years ago and has no salvage;value or other use. The allocated general overhead represents fixed costs of;the entire company, none of which would be avoided if the part were purchased;instead of produced internally. In addition, the space used to make part N29;could be used to make more of one of the company's other products, generating;an additional segment margin of $29,000 per year for that product. What would;be the impact on the company's overall net operating income of buying part N29;from the outside supplier?;A.;Net operating income would decline by $38,900 per;year.;B.;Net operating income would;increase by $29,000 per year.;C.;Net operating income would decline;by $32,600 per year.;D.;Net operating income would;increase by $19,100 per year.;41. Fillip;Corporation makes 4,000 units of part U13 each year. This part is used in one;of the company's products. The company's Accounting Department reports the;following costs of producing the part at this level of activity;An;outside supplier has offered to make and sell the part to the company for;$21.60 each. If this offer is accepted, the supervisor's salary and all of the;variable costs, including direct labor, can be avoided. The special equipment;used to make the part was purchased many years ago and has no salvage value or;other use. The allocated general overhead represents fixed costs of the entire;company. If the outside supplier's offer were accepted, only $3,000 of these;allocated general overhead costs would be avoided. In addition, the space used;to produce part U13 would be used to make more of one of the company's other;products, generating an additional segment margin of $13,000 per year for that;product.;What;would be the impact on the company's overall net operating income of buying;part U13 from the outside supplier?;A.;Net operating income would;increase by $13,000 per year.;B.;Net operating income would decline;by $42,600 per year.;C.;Net operating income would decline;by $68,600 per year.;D.;Net operating income would;increase by $9,200 per year.;42.;Ethridge Corporation is presently;making part H25 that is used in one of its products. A total of 9,000 units of;this part are produced and used every year. The company's Accounting Department;reports the following costs of producing the part at this level of activity;An;outside supplier has offered to make and sell the part to the company for;$15.40 each. If this offer is accepted, the supervisor's salary and all of the;variable costs can be avoided. The special equipment;used;to make the part was purchased many years ago and has no salvage value or other;use. The allocated general overhead represents fixed costs of the entire;company, none of which would be avoided if the part were purchased instead of;produced internally. If management decides to buy part H25 from the outside;supplier rather than to continue making the part, what would be the annual;impact on the company's overall net operating income?;A.;Net operating income would;increase by $24,300 per year.;B.;Net operating income would decline;by $24,300 per year.;C.;Net operating income would;increase by $58,500 per year.;D.;Net operating income would decline;by $58,500 per year.;43. Pitkin;Company produces a part used in the manufacture of one of its products. The;unit product cost of the part is $33, computed as follows;An;outside supplier has offered to provide the annual requirement of 10,000 of the;parts for only $27 each. The company estimates that 30% of the fixed;manufacturing overhead costs above will continue if the parts are purchased;from the outside supplier. Assume that direct labor is an avoidable cost in;this decision. Based on these data, the per unit dollar advantage or;disadvantage of purchasing the parts from the outside supplier would be;A.;$3 advantage;B.;$1 advantage;C.;$1 disadvantage;D.;$4 disadvantage;44. A;customer has requested that Inga Corporation fill a special order for 2,000;units of product K81 for $25.00 a unit. While the product would be modified;slightly for the special order, product K81's normal unit product cost is;$19.90;Direct;labor is a variable cost. The special order would have no effect on the;company's total fixed manufacturing overhead costs. The customer would like;modifications made to product K81 that would increase the variable costs by;$1.20 per unit and that would require an investment of $10,000 in special molds;that would have no salvage value.;This;special order would have no effect on the company's other sales. The company;has ample spare capacity for producing the special order. If the special order;is accepted, the company's overall net operating income would increase;(decrease) by;A.;$13,000;B.;$(9,700);C.;$10,200;D.;$(2,200);45. Rojo;Corporation has received a request for a special order of 8,000 units of;product W68 for $27.20 each. Product W68's unit product cost is $18.50;determined as follows;Direct;labor is a variable cost. The special order would have no effect on the;company's total fixed manufacturing overhead costs. The customer would like;modifications made to product W68 that would increase the variable costs by;$7.90 per unit and that would require an investment of $31,000 in special molds;that would have no salvage value.;This;special order would have no effect on the company's other sales. The company;has ample spare capacity for producing the special order. If the special order;is accepted, the company's overall net operating income would increase (decrease);by;A.;$(4,400);B.;$69,600;C.;$30,600;D.;$(24,600);46. Ellis;Television makes and sells portable televisions. Each television regularly;sells for $210. The following cost data per television is based on a full;capacity of 10,000 televisions produced each period.;A special;order has been received by Ellis for a sale of 2,000 televisions to an overseas;customer. The only selling costs that would be incurred on this order would be;$6 per television for shipping. Ellis is now selling 6,000 televisions through;regular channels each period. What should be the minimum selling price per;television in negotiating a price for this special order?;A.;$174;B.;$168;C.;$210;D.;$180;47. An;automated turning machine is the current constraint at Naik Corporation. Three;products use this constrained resource. Data concerning those products appear;below;Rank the products in order of;their current profitability from most profitable to least profitable. In other;words, rank the products in the order in which they should be emphasized.;A.;OP, KU, YY;B.;YY, OP, KU;C.;KU, YY, OP;D.;YY, KU, OP;48.;Pappan Corporation makes three;products that use compound W, the current constrained resource. Data concerning;those products appear below;Rank the products in order of;their current profitability from most profitable to least profitable. In other;words, rank the products in the order in which they should be emphasized.;A.;RH, GY, QF;B.;GY, RH, QF;C.;QF, GY, RH;D.;RH, QF, GY;49.;Consider the following production and cost data;for two products, X and Y;The company has 15,000 machine;hours available each period, and there is unlimited demand for each product.;What is the largest possible total contribution margin that can be realized;each period?;A.;$120,000;B.;$125,000;C.;$135,000;D.;$150,000;50. The;constraint at Mcglathery Corporation is time on a particular machine. The;company makes three products that use this machine. Data concerning those;products appear below;Assume;that sufficient time is available on the constrained machine to satisfy demand;for all but the least profitable product. Up to how much should the company be;willing to pay to acquire more of the constrained resource?;A.;$75.26 per unit;B.;$38.94 per unit;C.;$11.80 per minute;D.;$15.20 per minute;51.;Wright Company produces products;I, J, and K from a single raw material input. Budgeted data for the next month;follows;If the cost of the raw material;input is $78,000, which of the products should be processed beyond the;split-off point?;A.;Option A;B.;Option B;C.;Option C;D.;Option D;52. Two;products, IF and RI, emerge from a joint process. Product IF has been allocated;$25,300 of the total joint costs of $46,000. A total of 2,000 units of product;IF are produced from the joint process. Product IF can be sold at the split-off;point for $11 per unit, or it can be processed further for an additional total;cost of $10,000 and then sold for $13 per unit. If product IF is processed;further and sold, what would be the effect on the overall profit of the company;compared with sale in its unprocessed form directly after the split-off point?;A.;$31,300 less profit;B.;$6,000 less profit;C.;$16,000 more profit;D.;$19,300 more profit;53. Coakley;Beet Processors, Inc., processes sugar beets in batches. A batch of sugar beets;costs $48 to buy from farmers and $10 to crush in the company's plant. Two;intermediate products, beet fiber and beet juice, emerge from the crushing;process. The beet fiber can be sold as is for $24 or processed further for $16;to make the end product industrial fiber that is sold for $36. The beet juice;can be sold as is for $44 or processed further for $28 to make the end product;refined sugar that is sold for $70. How much profit (loss) does the company;make by processing the intermediate product beet juice into refined sugar;rather than selling it as is?;A.;$(31);B.;$(60);C.;$(2);D.;$(12);54. Galluzzo;Corporation processes sugar beets in batches. A batch of sugar beets costs $51;to buy from farmers and $14 to crush in the company's plant. Two intermediate;products, beet fiber and beet juice, emerge from the crushing process. The beet;fiber can be sold as is for $20 or processed further for $18 to make the end;product industrial fiber that is sold for $45. The beet juice can be sold as is;for $41 or processed further for $21 to make the end product refined sugar that;is sold for $62. How much profit (loss) does the company make by processing one;batch of sugar beets into the end products industrial fiber and refined sugar?;A.;$(104);B.;$(4);C.;$7;D.;$3;55. Beilke;Corporation processes sugar beets in batches that it purchases from farmers for;$53 a batch. A batch of sugar beets costs $12 to crush in the company's plant.;Two intermediate products, beet fiber and beet juice, emerge from the crushing;process. The beet fiber can be sold as is for $20 or processed further for $10;to make the end product industrial fiber that is sold for $26. The beet juice;can be sold as is for $30 or processed further for $29 to make the end product;refined sugar that is sold for $79. Which of the intermediate products should;be processed further?;A.;beet fiber should be processed;into industrial fiber, beet juice should be processed into refined sugar;B. beet;fiber should NOT be processed into industrial fiber, beet juice should be;processed into refined sugar;C.beet;fiber should NOT be processed into industrial fiber, beet juice should NOT be;processed into refined sugar;D. beet;fiber should be processed into industrial fiber, beet juice should NOT be;processed into refined sugar;56. Zollars;Cane Products, Inc., processes sugar cane in batches. The company buys a batch;of sugar cane from farmers for $70 which is then crushed in the company's plant;at a cost of $19. Two intermediate products, cane fiber and cane juice, emerge;from the crushing process. The cane fiber can be sold as is for $21 or;processed further for $13 to make the end product industrial fiber that is sold;for $42. The cane juice can be sold as is for $44 or processed further for $26;to make the end product molasses that is sold for $88. How much profit (loss);does the company make by processing one batch of sugar cane into the end;products industrial fiber and molasses?;A.;$26;B.;$2;C.;$(24);D.;$(128);57. Kempler;Corporation processes sugar cane in batches. The company purchases a batch of;sugar cane for $34 from farmers and then crushes the cane in the company's;plant at the cost of $15. Two intermediate products, cane fiber and cane juice;emerge from the crushing process. The cane fiber can be sold as is for $26 or;processed further for $17 to make the end product industrial fiber that is sold;for $41. The cane juice can be sold as is for $32 or processed further for $22;to make the end product molasses that is sold for $51. Which of the;intermediate products should be processed further?;A.;Cane fiber should be processed;into industrial fiber, Cane juice should be processed into molasses;B.Cane;fiber should NOT be processed into industrial fiber, Cane juice should NOT be;processed into molasses;C. Cane;fiber should be processed into industrial fiber, Cane juice should NOT be;processed into molasses;D. Cane;fiber should NOT be processed into industrial fiber, Cane juice should be;processed into molasses;Two;alternatives, code-named X and Y, are under consideration at Afalava;Corporation. Costs associated with the alternatives are listed below.;58.;Are the materials costs and;processing costs relevant in the choice between alternatives X and Y? (Ignore;the equipment rental and occupancy costs in this question.);A.;Only materials costs are relevant;B.;Only processing costs are relevant;C.;Both materials costs and;processing costs are relevant;D.;Neither materials costs nor;processing costs are relevant;59.;What is the differential cost of Alternative Y;over Alternative X, including all of the relevant costs?;A.;$103,000;B.;$39,000;C.;$142,000;D.;$122,500;Zurasky;Corporation is considering two alternatives: A and B. Costs associated with the;alternatives are listed below;60.;Are the materials costs and;processing costs relevant in the choice between alternatives A and B? (Ignore the;equipment rental and occupancy costs in this question.);A.;Neither materials costs nor;processing costs are relevant;B.;Only processing costs are relevant;C.;Only materials costs are relevant;D.;Both materials costs and;processing costs are relevant

 

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