Quiz 10 | Differential analysis - Management Accounting Fundamentals PDF

Preview

Summary

Management Accounting Fundamentals Practice questions and answers. Some answers are not given, however, the incorrect answers are marked....

Description

Question 1 Two alternatives, code-named X and Y, are under consideration at Guyer Corporation. Costs associated with the alternatives are listed below. Alternativ Alternativ eX eY Materials $ 41,000 costs Processing $ 45,000 costs Equipment $ 17,000 rental Occupancy $ 16,000 costs Are the materials costs and X and Y?

$ 59,000 $ 45,000 $ 17,000 $ 24,000 processing costs relevant in the choice between alternatives

Only materials costs are relevant Only processing costs are relevant Both materials costs and processing costs are relevant Neither materials costs nor processing costs are relevant Question 2 The Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $26,800. If these calculators are upgraded at a total cost of $10,000, they can be sold for a total of $30,000. As an alternative, the calculators can be sold in their present condition for $11,200. Assume that Tolar decides to upgrade the calculators. At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?

$8 per calculator $30 per calculator $53 per calculator $67 per calculator Question 3 Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows: Annual sales

2,500

Selling price per unit Variable costs per unit: Production Selling Avoidable fixed costs per year:

$ 304

Production

$ 125 $ 49 $ 50,000

unit s

$ 75,000 Allocated common fixed corporate costs $ per year 55,000 If the new product is added, the combined contribution margin of the other, existing products is expected to drop $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product. Selling

If the new product is added next year, the financial advantage (disadvantage) resulting from this decision would be:

$145,00 0 $135,00 0 $200,00 0 $325,00 0 Question 4 Fabri Corporation is considering eliminating a department that has an annual contribution margin of $35,000 and $70,000 in annual fixed costs. Of the fixed costs, $25,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:

$35,000 ($35,00 0) ($10,00 0) $10,000 Avoidable fixed costs = $70,000 − $25,00 = $45,00 CM: $35,000 AFC: 45,500 Segment Margin: (10,000) If the department were eliminated, the company would eliminate the department's negative segment margin of $10,000. Question 5 Ahrends Corporation makes 70,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead

$ 17.80 19.00 1.00 17.10

$ 54.90 An outside supplier has offered to sell the company all of these parts it needs for $48.50 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 $273,000 per year. Unit product cost

If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $8.20 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. What is the financial advantage (disadvantage) of purchasing the part rather than making it? (Round your intermediate calculations to 2 decimal places.)

$147,000 $448,000 ($126,00 0) $273,000 Question 6 Gallerani Corporation has received a request for a special order of 6,000 units of product A90 for $21.20 each. Product A90's unit product cost is $16.20, determined as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead

$ 6.10 4.20 2.30 3.60

$ 16.20 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 A90 that would increase the variable costs by $4.20 per unit and that would require an investment of $21,000 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. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: Unit product cost

($18,600)

$30,000 ($16,20 0) $5,400 Question 7 Danny Dolittle makes crafts in his spare time and always sells everything he makes at local craft shows. Danny specializes in four products. Because Danny's time is limited before the next craft show, he is trying to decide how to use his time to the best advantage. Information related to the four products that Danny produces are shown below:

Rag Dolls

Pot Holders

Bread Baskets

Finger Puppets

Contribution margin per $8 $2 $ 12 $6 unit Contribution margin ratio 40% 25% 32% 30% Time required per unit (in 1.4 0.5 3.5 2.0 hours) Rank the products from the most profitable to the least profitable use of the constrained resource. Pot Holders, Rag Dolls, Finger Puppets, Bread Baskets

Rag Dolls, Bread Baskets, Finger Puppets, Pot Holders Bread Baskets, Rag Dolls, Finger Puppets, Pot Holders Rag Dolls, Pot Holders, Bread Baskets, Finger Puppets Question 8 The constraint at Rauchwerger Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: WX KD FS $ $ $ Selling price per unit 192.00 542.66 222.84 Variable cost per $ $ $ unit 158.72 420.54 167.76 Minutes on the 3.20 8.60 3.60 constraint 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? (Round your intermediate calculations to 2 decimal places.)

$15.30 per minute $122.12 per unit $33.28 per unit $10.40 per minute Question 9 Dock Corporation makes two products from a common input. Joint processing costs up to the split-off point total $33,600 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Product Product Total Y X Allocated joint processing $ $ 16,800 $ 16,800 costs 33,600 Sales value at split-off point $ 24,000 $ 24,000 $

Product Product Total X Y 48,000 $ Costs of further processing $ 15,000 $ 18,700 33,700 Sales value after further $ $ 35,500 $ 45,100 processing 80,600 What is the financial advantage (disadvantage) for the company of processing Product X beyond the split-off point?

$20,50 0 $3,700 $27,70 0 ($3,50 0) Question 10 Accepting a special order will improve overall net operating income if the revenue from the special order exceeds:

the contribution margin on the order. the variable costs associated with the order. the sunk costs associated with the order. the incremental costs associated with the order.

Question 1 Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below: Alternativ Alternativ eA eB Materials costs Processing

$ 40,000

$ 56,000

$ 37,000

$ 37,000

Alternativ Alternativ eA eB costs Equipment $ 13,000 $ 13,000 rental Occupancy $ 15,000 $ 22,000 costs Are the materials costs and processing costs relevant in the choice between alternatives A and B?

Neither materials costs nor processing costs are relevant Only processing costs are relevant

Both materials costs and processing costs are relevant Only materials costs are relevant

Question 2 The Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $26,800. If these calculators are upgraded at a total cost of $10,000, they can be sold for a total of $30,000. As an alternative, the calculators can be sold in their present condition for $11,200. Assume that Tolar decides to upgrade the calculators. At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?

$53 per calculator $8 per calculator $30 per calculator $67 per calculator Question 3 Balser Corporation manufactures and sells a number of products, including a product called JYMP. Results for last year for the manufacture and sale of JYMPs are as follows: $ 960,000

Sales Less expenses: Variable production costs Sales commissions Salary of product manager Fixed product advertising Fixed manufacturing overhead

$ 464,000 144,000 100,000 160,000 132,000

1,000,00 0

$ (40,000) Balser is trying to decide whether to discontinue the manufacture and sale of JYMPs. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable. Net operating loss

Assume that dropping Product JYMP will have no effect on other products. The annual financial advantage (disadvantage) for the company of eliminating this product should be:

($132,00 0) ($172,00 0) $40,000 ($92,000 ) Question 4 The Cook Corporation has two divisions—East and West. The divisions have the following revenues and expenses: East West $ $ 500,000 550,000 200,000 275,000 150,000 180,000

Sales Variable costs Traceable fixed costs Allocated common corporate costs

135,000 170,000

$ $ 15,000 (75,000) 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: Net operating income (loss)

($155,00 0) ($75,000 ) $15,000 ($60,000 ) Question 5 Gordon Corporation produces 1,000 units of a part per year which are used in the assembly of one of its products. The unit cost of producing these parts is: Variable manufacturing cost Fixed manufacturing cost Total manufacturing cost

$ 15 12 $ 27

The part can be purchased from an outside supplier at $20 per unit. If the part is purchased from the outside supplier, two thirds of the total fixed costs incurred in producing the part can be avoided. The annual financial advantage (disadvantage) for the company as a result of buying the part from the outside supplier would be:

$7,000 ($1,00 0) ($5,00 0) $3,000

Question 6 Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows:

Per Unit Direct materials $ 22.50 Direct labor $ 7.50 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 19.00 Variable selling & administrative $ 2.70 expense Fixed selling & administrative $ 8.60 expense The normal selling price of the product is $67.80 per unit. An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.90 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $60.60 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:

$84,300 ($15,90 0) $27,300 ($4,200 ) Question 7 The Wester Corporation produces three products with the following costs and selling prices: Produ ct A

B

Selling price per unit $ 21 Variable cost per unit $ 11 Fixed cost per unit

$5

C $ $ 12 32 $ $7 18 $3 $9

Direct labor hours per 0.4 0.1 0.7 unit Machine hours per 0.2 0.5 0.2 unit The company has insufficient capacity to fulfill all of the demand for these three products. If direct labor hours are the constraint, then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:

A, C, B B, A, C A, B, C C, A, B Question 8 The constraint at Rauchwerger Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: WX KD FS $ $ $ Selling price per unit 192.00 542.66 222.84 Variable cost per $ $ $ unit 158.72 420.54 167.76 Minutes on the 3.20 8.60 3.60 constraint 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? (Round your intermediate calculations to 2 decimal places.)

$122.12 per unit $33.28 per unit $10.40 per minute $15.30 per minute Question 9 Mae Refiners, Incorporated, processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $60 to buy from farmers and $13 to crush in the company's plant. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $29 or processed further for $13 to make the end product industrial fiber that is sold for $61. The cane juice can be sold as is for $40 or processed further for $28 to make the end product molasses that is sold for $67.

What is the financial advantage (disadvantage) for the company from processing one batch of sugar cane into the end products industrial fiber and molasses rather than not processing that batch at all?

($114) per batch $18 per batch ($4) per batch $14 per batch Question 10 Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called:

opportunity costs. irrelevant costs. avoidable costs. sunk costs.

Question 1 Which of the following would be relevant in the decision to sell or throw out obsolete inventory? Direct material cost assigned to the Fixed overhead cost assigned to the inventory inventory A) Yes Yes B) Yes No C) No Yes D) No No

Choice C Choice B Choice A Choice D Question 2

Otool Incorporated is considering using stocks of an old raw material in a special project. The special project would require all 240 kilograms of the raw material that are in stock and that originally cost the company $2,112 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $9.25 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $8.35 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 $71 for all 240 kilograms. What is the relevant cost of the 240 kilograms of the raw material when deciding whether to proceed with the special project?

$2,00 4 $2,11 2 $2,22 0 $1,93 3 Question 3

Lusk Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company of eliminating this product should be: ($30,00 0) ($40,00 0) $30,000 $40,000 Question 4

Fabri Corporation is considering eliminating a department that has an annual contribution margin of $36,000 and $72,000 in annual fixed costs. Of the fixed costs, $18,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be: $18,000 ($36,00 0) $36,000 ($18,00 0) Question 5 Elly Industries is a multi-product company that currently manufactures 30,000 units of part MR24 each month for use in production of its products. The facilities now being used

to produce part MR24 have a fixed monthly cost of $150,000 and a capacity to produce 35,000 units per month. If Elly were to buy part MR24 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40% of their present amount. The variable production costs of Part MR24 are $11 per unit. If Elly industries is able to obtain part MR24 from an outside supplier at a purchase price of $10 per unit, the monthly financial advantage (disadvantage) of buying the part rather than making it would be:

$120,00 0 $180,00 0 $30,000 $90,000 Question 6 The following are Silver Corporation's unit costs of making and selling an item at a volume of 8,000 units per month (which represents the company's capacity): Manufacturing: Direct materials Direct labor Variable overhead Fixed overhead

$ 4 $ 5 $ 2 $ 8

Selling and administrative: $ 1 $ Fixed 6 Present sales amount to 7,000 units per month. An order has been received from a customer in a foreign market for 1,000 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. Variable

What is the financial advantage (disadvantage) for the company from this special order if it prices the 1,000 units at $20 per unit?

$1,000 $9,000 $8,000 ($6,00 0)

Question 8 Bertucci Corporation makes three products that use the current constraint which is a particular type of machine. Data concerning those products appear below: TC GL NG $ $ $ Selling price per unit 494.40 449.43 469.68 Variable cost per $ $ $ unit 395.20 320.21 373.92 Minutes on the 8.00 7.10 7.60 constraint Assume that sufficient constraint time is available 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? (Round your intermediate calculations to 2 decimal places.)

$95.76 per unit $18.20 per minute $129.22 per unit $12.40 per minute Question 9 Stinehelfer Beet Processors, Incorporated, processes sugar beets in batches. A batch of sugar beets costs $56 to buy from farmers and $13 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 $12 to make the end product industrial fiber that is sold for $31. The beet juice can be sold as is for $43 or processed further for $29 to make the end product refined sugar that is sold for $91. What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is?

($50 ) $6 ($16 ) $19...