CourseLover
$10/per page/Negotiable
MCQ?
1- Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows:
Wood Aluminum Hard Rubber Total
Sales $500,000 $200,000 $65,000 $765,000
Variable expenses $325,000 $140,000 $ 58,000 $523,000
Contribution margin $175,000 $ 60,000 $ 7,000 $242,000
Fixed expenses $ 75,000 $ 35,000 $ 22,000 $132,000
Net income (loss) $100,000 $ 25,000 $ (15,000) $110,000
Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?
a. $103,000
b. $140,000
c. $125,000
d. $105,000
2- Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent:
Direct materials $8,400
Direct labor 11,250
Variable overhead 12,600
Fixed overhead 16,200
An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit.
If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600. The increase (decrease) in net income from accepting the offer would be
a. $150.
b. $7,350.
c. $(150).
d. $(3,600).
3- Able Company’s unit manufacturing cost is:
Variable Costs $50
Fixed Costs 25
A special order for 2,000 units has been received from a foreign company. The unit price requested is $55. The normal unit price is $80. If the order is accepted, unit variable costs will increase by $2 for additional freight costs. If the order is accepted, incremental profit (loss) will be.
a. $(46,000).
b. $6,000.
c. $10,000.
d. $(40,000).
4- Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered:
Old Machine New Machine
Price $300,000 $600,000
Accumulated Depreciation $ 90,000 -0-
Remaining useful life 10 years -0-
Useful life -0- 10 years
Annual operating costs $240,000 $180,600
If the old machine is replaced, it can be sold for $24,000.The net advantage (disadvantage) of replacing the old machine is:
a. $24,000
b. $(60,000)
c. $18,000
d. $(6,000)
5- Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production:
Direct materials $ 55,000
Direct labor $160,000
Variable overhead $ 75,000
Fixed overhead $175,000
If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable. If the outside supplier offers a unit price of $68, net income will increase (decrease) by:
a. $(10,000).
b. $85,000.
c. $125,000.
d. $(50,000).
6- Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2013:
Sales $1,400,000
Variable expenses $ 920,000
Fixed expenses $ 600,000
Net loss $ (120,000)
If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line?
a. $1,340,000
b. $1,100,000
c. $1,520,000
d. $180,000
7- Hi-Tech Inc. has several outdated computers that cost a total of $17,800 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If Hi-Tech updates the computers and sells them, net income will increase by $9,000. At what price were the updated versions sold?
a. $26,800
b. $16,000
c. $13,600
d. $13,200
8- Paul Bunyan Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period:
Sales Value Additional Sales Value after
Product at Split-off Variable Costs Further Processing
Green lumber $159,600 $24,000 $178,000
Rough lumber $124,000 $28,200 $173,600
Sawdust $102,000 $19,600 $130,000
The additional profit that would result from processing rough lumber further is
a. $49,600.
b. $145,400.
c. $95,800.
d. $21,400.