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Question;60.;What is the differential cost of Alternative B;over Alternative A, including all of the relevant costs?;A.;$44,000;B.;$149,000;C.;$105,000;D.;$127,000;Austin;Wool Products purchases raw wool and processes it into yarn. The spindles of;yarn can then be sold directly to stores or they can be used by Austin Wool;Products to make afghans. Each afghan requires one spindle of yarn. Current;cost and revenue data for the spindles of yarn and for the afghans are as;follows;Each;month 4,000 spindles of yarn are produced that can either be sold outright or;processed into afghans.;62.;If Austin chooses to produce 4,000;afghans each month, the change in the monthly net operating income as compared;to selling 4,000 spindles of yarn is;A.;$24,000 decrease;B.;$24,000 increase;C.;$16,000 decrease;D.;$16,000 increase;63.;What is the lowest price Austin;should be willing to accept for one afghan as long as it can sell spindles of;yarn to the outside market for $12 each?;A.;$32;B.;$30;C.;$28;D.;$26;The;Tingey Company has 500 obsolete microcomputers that are carried in inventory at;a total cost of $720,000. If these microcomputers are upgraded at a total cost;of $100,000, they can be sold for a total of $160,000. As an alternative, the;microcomputers can be sold in their present condition for $50,000.;64.;The sunk cost in this situation is;A.;$720,000;B.;$160,000;C.;$50,000;D.;$100,000;65. What;is the net advantage or disadvantage to the company from upgrading the;computers rather than selling them in their present condition?;A.;$110,000 advantage;B.;$660,000 disadvantage;C.;$10,000 advantage;D.;$60,000 advantage;66. Suppose;the selling price of the upgraded computers has not been set. At what selling;price per unit would the company be as well off upgrading the computers as if;it just sold the computers in their present condition?;A.;$100;B.;$770;C.;$300;D.;$210;The;management of Fries Corporation has been concerned for some time with the;financial performance of its product R89H and has considered discontinuing it;on several occasions. 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 $31,000 of the;fixed manufacturing expenses and $46,000 of the fixed selling and;administrative expenses are avoidable if product R89H is discontinued.;67. According;to the company's accounting system, what is the net operating income earned by;product R89H?;A.;$143,000;B.;$8,000;C.;$(8,000);D.;$(143,000);68.;What would be the effect on the company's overall;net operating income if product R89H were dropped?;A.;Overall net operating income would decrease by;$66,000.;B.;Overall net operating income would;decrease by $8,000.;C.;Overall net operating income would;increase by $66,000.;D.;Overall net operating income would;increase by $8,000.;The;management of Freshwater Corporation is considering dropping product C11B. Data;from the company's accounting system appear below;All;fixed expenses of the company are fully allocated to products in the company's;accounting system. Further investigation has revealed that $211,000 of the;fixed manufacturing expenses and $122,000 of the fixed selling and;administrative expenses are avoidable if product C11B is discontinued.;69. According;to the company's accounting system, what is the net operating income earned by;product C11B?;A.;$74,000;B.;$(521,000);C.;$(74,000);D.;$521,000;70.;What would be the effect on the company's overall;net operating income if product C11B were dropped?;A.;Overall net operating income would decrease by;$188,000.;B.;Overall net operating income would;increase by $74,000.;C.;Overall net operating income would;decrease by $74,000.;D.;Overall net operating income would;increase by $188,000.;The;Western Company is considering the addition of a new product to its current;product lines. The expected cost and revenue data for the new product are as;follows;If the new product is;added to the existing product line, then sales of existing products will;decline. As;a;consequence, the contribution margin of the other existing product lines is;expected to drop $78,000 per year.;71. If;the new product is added next year, the increase in net operating income;resulting from this decision would be;A.;$387,000;B.;$261,000;C.;$183,000;D.;$207,000;72. What;is the lowest selling price per unit among those listed below that could be;charged for the new product and still make it economically desirable to add the;new product?;A.;$240;B.;$222;C.;$291;D.;$249;Condensed;monthly operating income data for Cosmo Inc. for November is presented below.;Additional information regarding Cosmo's operations follows the statement.;Three-quarters of each;store's traceable fixed expenses are avoidable if the store were to be closed.;Cosmo allocates common;fixed expenses to each store on the basis of sales dollars.;Management;estimates that closing the Town Store would result in a ten percent decrease in;Mall Store sales, while closing the Mall Store would not affect Town Store;sales.;The operating results for November;are representative of all months.;73. A;decision by Cosmo Inc. to close the Town Store would result in a monthly;increase (decrease) in Cosmo's operating income of;A.;$4,000;B.;$(10,800);C.;$(800);D.;$(6,000);74. Cosmo;is considering a promotional campaign at the Town Store that would not affect;the Mall Store. Increasing annual promotional expenses at the Town Store by;$60,000 in order to increase Town Store sales by ten percent would result in a;monthly increase (decrease) in Cosmo's operating income of;A.;$(16,800);B.;$3,400;C.;$7,000;D.;$(1,400);The;Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to;its current product lines. Expected cost and revenue data for the new cabinets;are as follows;If;the new cabinets are added, it is expected that the contribution margin of;other product lines at the cabinet shop will drop by $20,000 per year.;75.;If the new cabinet product line is;added next year, the increase in net operating income resulting from this;decision would be;A.;$80,000;B.;$225,000;C.;$125,000;D.;$105,000;76.;What is the lowest selling price;per unit that could be charged for the new cabinets from the following list and;still make it economically desirable to add the new product line?;A.;$160;B.;$164;C.;$171;D.;$151;Knaack;Corporation is presently making part R20 that is used in one of its products. A;total of 18,000 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 produce and sell the part to the company for;$27.70 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, none of which would be avoided if the part were purchased instead of;produced internally.;77.;If management decides to buy part;R20 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 $162,000 per year.;B.;Net operating income would;increase by $50,400 per year.;C.;Net operating income would decline;by $50,400 per year.;D.;Net operating income would decline;by $162,000 per year.;78. In;addition to the facts given above, assume that the space used to produce part;R20 could be used to make more of one of the company's other products;generating an additional segment margin of $27,000 per year for that product.;What would be the impact on the company's overall net operating income of;buying part R20 from the outside supplier and using the freed space to make;more of the other product?;A.;Net operating income would increase by $27,000 per;year.;B.;Net operating income would decline;by $135,000 per year.;C.;Net operating income would decline;by $23,400 per year.;D.;Net operating income would decline;by $189,000 per year.;Meltzer;Corporation is presently making part O13 that is used in one of its products. A;total of 3,000 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 produce and sell the part to the company for;$27.00 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.;79.;If management decides to buy part;O13 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 $23,100 per year.;B.;Net operating income would decline;by $26,100 per year.;C.;Net operating income would decline;by $20,100 per year.;D.;Net operating income would decline;by $8,700 per year.;80. In;addition to the facts given above, assume that the space used to produce part;O13 could be used to make more of one of the company's other products;generating an additional segment margin of $26,000 per year for that product.;What would be the impact on the company's overall net operating income of;buying part O13 from the outside supplier and using the freed space to make;more of the other product?;A.;Net operating income would decline by $49,100 per;year.;B.;Net operating income would;increase by $26,000 per year.;C.;Net operating income would;increase by $2,900 per year.;D.;Net operating income would;increase by $17,300 per year.;Ahsan;Company makes 60,000 units per year of a part it uses in the products it;manufactures. The unit product cost of this part is computed as follows;An;outside supplier has offered to sell the company all of these parts it needs;for $45.70 a unit. If the company accepts this offer, the facilities now being;used to make the part could be used to make more units of a product that is in;high demand. The additional contribution margin on this other product would be;$318,000 per year.;If;the part were purchased from the outside supplier, all of the direct labor cost;of the part would be avoided. However, $3.50 of the fixed manufacturing;overhead cost being applied to the part would continue even if the part were;purchased from the outside supplier. This fixed manufacturing overhead cost;would be applied to the company's remaining products.;81.;How much of the unit product cost;of $40.50 is relevant in the decision of whether to make or buy the part?;A.;$40.50;B.;$15.20;C.;$27.90;D.;$37.00;82.;What is the net total dollar advantage;(disadvantage) of purchasing the part rather than making it?;A.;$318,000;B.;$(522,000);C.;$(312,000);D.;$(204,000);83.;What is the maximum amount the;company should be willing to pay an outside supplier per unit for the part if;the supplier commits to supplying all 60,000 units required each year?;A.;$40.50;B.;$42.30;C.;$45.80;D.;$5.30;Talboe;Company makes wheels which it uses in the production of children's wagons.;Talboe's costs to produce 200,000 wheels annually are as follows;An;outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel.;If the wheels are purchased from the outside supplier, $25,000 of annual fixed;manufacturing overhead would be avoided and the facilities now being used to make;the wheels would be rented to another company for $55,000 per year.;84. If;Talboe chooses to buy the wheel from the outside supplier, then the change in;annual net operating income is a;A.;$5,000 decrease;B.;$50,000 increase;C.;$70,000 increase;D.;$40,000 increase;85. What;is the highest price that Talboe could pay the outside supplier for each wheel;and still be economically indifferent between making or buying the wheels?;A.;$0.95;B.;$1.15;C.;$1.00;D.;$1.05;The;Rodgers Company makes 27,000 units of a certain component each year for use in;one of its products. The cost per unit for the component at this level of;activity is as follows;Rodgers;has received an offer from an outside supplier who is willing to provide 27,000;units of this component each year at a price of $25 per component. Assume that;direct labor is a variable cost. None of the fixed manufacturing overhead would;be avoidable if this component were purchased from the outside supplier.;86. Assume;that there is no other use for the capacity now being used to produce the;component and the total fixed manufacturing overhead of the company would be;unaffected by this decision. If Rodgers;Company purchases the components;rather than making them internally, what would be the impact on the company's;annual net operating income?;A.;$94,500 increase;B.;$81,000 decrease;C.;$237,600 decrease;D.;$124,000 increase;87. Assume;that if the component is purchased from the outside supplier, $35,100 of annual;fixed manufacturing overhead would be avoided and the facilities now being used;to make the component would be rented to another company for $64,800 per year.;If Rodgers chooses to buy the component from the outside supplier under these;circumstances, then the impact on annual net operating income due to accepting;the offer would be;A.;$18,900 decrease;B.;$18,900 increase;C.;$21,400 decrease;D.;$21,400 increase;Meacham;Company has traditionally made a subcomponent of its major product. Annual;production of 20,000 subcomponents results in the following costs;Meacham;has received an offer from an outside supplier who is willing to provide 20,000;units of this subcomponent each year at a price of $28 per subcomponent.;Meacham knows that the facilities now being used to make the subcomponent would;be rented to another company for $75,000 per year if the subcomponent were;purchased from the outside supplier. Otherwise, the fixed overhead would be;unaffected.;88.;If Meacham decides to purchase the;subcomponent from the outside supplier, how much higher or lower will net;operating income be than if Meacham continued to make the subcomponent?;A.;$45,000 higher;B.;$70,000 higher;C.;$30,000 lower;D.;$70,000 lower;89. Suppose;the price for the subcomponent has not been set. At what price per unit charged;by the outside supplier would Meacham be economically indifferent between;making the subcomponent or buying it from the outside?;A.;$30.25;B.;$29.25;C.;$26.50;D.;$31.50

 

Paper#50045 | Written in 18-Jul-2015

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