ACCT 241 Week 12 Quiz

ACCT 241 Week 12 Quiz | Assignment Help | American University 

1.

Otool Inc. is considering using stocks of an old raw material in a special project. The special project would require all 170 kilograms of the raw material that are in stock and that originally cost the company $2,036 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $8 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $7.00 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $84 for all 170 kilograms. What is the relevant cost of the 170 kilograms of the raw material when deciding whether to proceed with the special project?

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$1,190

$1,106

$1,305

$1,309

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2.

The following are Silver Corporation's unit costs of making and selling an item at a volume of 9,500 units per month (which represents the company's capacity):

 

Manufacturing:
Direct materials	$	2.00
Direct labor	$	3.00
Variable overhead	$	1.50
Fixed overhead	$	0.35
Selling and administrative:
Variable	$	3.00
Fixed	$	0.75

 

Present sales amount to 7,500 units per month. An order has been received from a customer in a foreign market for 2,000 units. The order would not affect regular sales. Total fixed costs, both manufacturing and selling and administrative, would not be affected by this order. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assume that direct labor is a variable cost.

 

Assume the company has 50 units left over from last year which have small defects and which will have to be sold at a reduced price for scrap. The sale of these defective units will have no effect on the company's other sales. Which of the following costs is relevant in this decision?

Multiple Choice

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$6.50 variable manufacturing cost

$6.85 unit product cost

$3.00 variable selling and administrative cost

$10.60 full cost

 

 

3.

Sardi Inc. is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 14,000 of the components each year. The unit product cost of the component according to the company's cost accounting system is given as follows:

 

Direct materials	$	9.80
Direct labor		6.80
Variable manufacturing overhead		2.60
Fixed manufacturing overhead		4.60
Unit product cost	$	23.80

 

Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 35% is avoidable if the component were bought from the outside supplier. In addition, making the component uses 3 minutes on the machine that is the company's current constraint. If the component were bought, time would be freed up for use on another product that requires 6 minutes on this machine and that has a contribution margin of $6.20 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? (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

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$26.90 per unit

$25.30 per unit

$20.81 per unit

$23.91 per unit

 

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4.

A customer has requested that Lewelling Corporation fill a special order for 2,800 units of product S47 for $32 a unit. While the product would be modified slightly for the special order, product S47's normal unit product cost is $17.70:

 

Direct materials	$	5.20
Direct labor		3.00
Variable manufacturing overhead		2.30
Fixed manufacturing overhead		7.20
Unit product cost	$	17.70

 

Assume that 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 S47 that would increase the variable costs by $1.30 per unit and that would require an investment of $16,000.00 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. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be:

 

Multiple Choice

 

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($40,560)

($15,700)

$16,200

($2,600)

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5.

In a sell or process further decision, consider the following costs:

 

1. A variable production cost incurred prior to split-off.
2. A variable production cost incurred after split-off.
3. An avoidable fixed production cost incurred after split-off.

 

Which of the above costs is (are) not relevant in a decision regarding whether the product should be processed further?

Multiple Choice

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Only I

Only III

Only I and II

Only I and III

 

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6.

 

The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is:

Multiple Choice

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the variable manufacturing cost of the component.

the total manufacturing cost of the component.

the fixed manufacturing cost of the component.

zero.

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7.

The Jabba Corporation manufactures the "Snack Buster" which consists of a wooden snack chip bowl with an attached porcelain dip bowl. Which of the following would be relevant in Jabba's decision to make the dip bowls or buy them from an outside supplier?

	Fixed overhead cost that can be eliminated if the bowls are purchased from the outside supplier	The variable selling cost of the Snack Buster
A)	Yes	Yes
B)	Yes	No
C)	No	Yes
D)	No	No

 

Multiple Choice

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Choice A

Choice B

Choice C

 Choice D

 

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8.

Two products, QI and VH, emerge from a joint process. Product QI has been allocated $14,300 of the total joint costs of $35,000. A total of 2,100 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $11 per unit, or it can be processed further for an additional total cost of $10,100 and then sold for $13 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point?

 

Multiple ChoiceTop of Form

($20,600)

$(5,900)

$17,200

($8,400)

 

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9.

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses:

 

	East			West
Sales	$	550,000		$	489,500
Variable costs		198,000			258,500
Traceable fixed costs		169,500			194,400
Allocated common corporate costs		117,500			141,100
Net operating income (loss)	$	65,000		$	(104,500	)

 

The management of Cook is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall company net operating income (loss) of:

 Multiple Choice

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$65,000

      $(76,100)

$(104,500)

$(39,500) 

10. 

The SP Corporation makes 50,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is:

 

Direct materials	$	10.90
Direct labor	$	9.90
Variable manufacturing overhead	$	4.15
Fixed manufacturing overhead	$	5.10

 

An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $28.15. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: 

Multiple Choice

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($95,000)

$367,500

$160,000

$255,000

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