Deck 11: Differential Analysis: The Key to Decision Making

Question 1

Opportunity costs are not usually recorded in the accounts of a business.

Answer 1

True
Explanation: Feedback:

Question 2

Depreciation expense on existing factory equipment is usually irrelevant in a decision of whether to accept or reject a special offer for a company's product.

Answer 2

True
Explanation: Feedback:

Question 3

Fixed costs may or may not be relevant in decisions about whether a product should be dropped.

Answer 3

True
Explanation: Feedback:

Question 4

Future costs that do not differ between the alternatives in a decision are avoidable costs.

Question 5

The book value of old equipment is a relevant cost in a decision to replace that equipment.(Ignore taxes. )

Question 6

A vertically integrated company is more dependent on its suppliers than a company that is not vertically integrated.

Question 7

A cost that is relevant in one decision may not be relevant in another decision.

Question 8

In a decision to drop a segment,the opportunity cost of the space occupied by the segment is the cost of renting or building similar space nearby.

Question 9

The book value of a machine,as shown on the balance sheet,is not relevant in a decision concerning the replacement of that machine by another machine.(Ignore taxes. )

Question 10

An avoidable cost is a cost that can be completely eliminated irrespective of whether one chooses one alternative or another in a decision.

Question 11

When a company is involved in only one activity in the entire value chain,it is vertically integrated.

Question 12

A fixed cost cannot be a differential cost.

Question 13

In a special order situation,any fixed cost that could be avoided if the special order were not accepted would be irrelevant.

Question 14

Fixed costs may or may not be sunk costs.

Question 15

Only future costs that differ between alternatives are relevant in decision making.

Question 16

In a decision to drop a product,the product should not be charged for factory rent if the space in which the product is produced has no alternative use and the rental payment is unavoidable.

Question 17

One of the advantages of allocating common fixed costs to a product is that such allocations more accurately reflect the product's true profitability.

Question 18

A disadvantage of vertical integration is that by pooling demand for parts from a number of companies,a supplier will face diseconomies of scale that result in lower quality and higher cost than if every company makes its own parts.

Question 19

A cost that can be avoided by choosing one alternative over another is not relevant for decision purposes.

Question 20

A product whose revenues do not cover the sum of its variable costs,its traceable fixed costs,and its allocated share of general corporate administrative expenses should usually be dropped.

Question 21

Moyer Corporation is a specialty component manufacturer with idle capacity.Management would like to use its extra capacity to generate additional profits.A potential customer has offered to buy 2,300 units of component TIB.Each unit of TIB requires 9 units of material F58 and 7 units of material D66.Data concerning these two materials follow:
Material F58 is in use in many of the company's products and is routinely replenished.Material D66 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up.
What would be the relevant cost of the materials,in total,for purposes of determining a minimum acceptable price for the order for product TIB?

A)$189,290
B)$174,215
C)$168,533
D)$200,905

Question 22

In a make-or-buy decision,relevant costs include:

A)unavoidable fixed costs
B)avoidable fixed costs
C)fixed factory overhead costs applied to products
D)fixed selling and administrative expenses

Question 23

Opportunity costs are:

A)not used for decision making.
B)the same as variable costs.
C)the same as historical costs.
D)relevant in decision making.

Question 24

Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further.

Question 25

In a sell or process further decision,which of the following costs is relevant? I.A variable production cost incurred after split-off.
II)A fixed production cost incurred prior to split-off.

A)Only I
B)Only II
C)Both I and II
D)Neither I nor II

Question 26

Eliminating nonproductive processing time is particularly important in work stations that do not contain bottlenecks.

Question 27

Hal currently works as the fry guy at Burger Haven but is thinking of quitting his job to attend college full time next semester.Which of the following would be considered an opportunity cost of attending college?

A)the cost of the textbooks
B)the cost of the cola that Hal will consume during class
C)Hal's lost wages at Burger Haven
D)the cost of commuting to the Burger Haven job

Question 28

When a company has a production constraint,total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource.

Question 29

Bosques Corporation has in stock 35,800 kilograms of material L that it bought five years ago for $5.55 per kilogram.This raw material was purchased to use in a product line that has been discontinued.Material L can be sold as is for scrap for $1.67 per kilogram.An alternative would be to use material L in one of the company's current products,Q08C,which currently requires 2 kilograms of a raw material that is available for $9.15 per kilogram.Material L can be modified at a cost of $0.78 per kilogram so that it can be used as a substitute for this material in the production of product Q08C.However,after modification,4 kilograms of material L is required for every unit of product Q08C that is produced.Bosques Corporation has now received a request from a company that could use material L in its production process.Assuming that Bosques Corporation could use all of its stock of material L to make product Q08C or the company could sell all of its stock of the material at the current scrap price of $1.67 per kilogram,what is the minimum acceptable selling price of material L to the company that could use material L in its own production process?

A)$5.365 per kg
B)$3.795 per kg
C)$2.133 per kg
D)$1.675 per kg

Question 30

When a multi-product factory operates at full capacity,decisions must be made about which products to emphasize.In making such decisions,products should be ranked based on:

A)selling price per unit
B)contribution margin per unit
C)contribution margin per unit of the constraining resource
D)unit sales volume

Question 31

Management is considering a one-time-only special order.There is sufficient idle capacity to fill the order without affecting any normal sales.Which one of the following is NOT relevant in making the decision?

A)absorption costing unit product costs
B)variable costs
C)incremental costs
D)differential costs

Question 32

The split-off point in a process that produces joint products is the point in the manufacturing process at which the joint products are sent to separate customers.

Question 33

Consider the following statements: I.A division's net operating income,after deducting both traceable and allocated common fixed costs,is negative.
II)The division's avoidable fixed costs exceed its contribution margin.
III)The division's traceable fixed costs plus its allocated common corporate costs exceed its contribution margin.
Which of the above statements is a valid reason for eliminating the division?

A)Only I
B)Only II
C)Only III
D)Only I and II

Question 34

Which of the following is not an effective way of dealing with a production constraint (i.e. ,bottleneck)?

A)Reduce the number of defective units produced at the bottleneck.
B)Pay overtime to workers assigned to the bottleneck.
C)Pay overtime to workers assigned to work stations located after the bottleneck in the production process.
D)Subcontract work that would otherwise require use of the bottleneck.

Question 35

Joint products are products that are sold to customers as a set or as part of a group of products.

Question 36

Two or more products produced from a common input are called:

A)common costs.
B)joint products.
C)joint costs.
D)sunk costs.

Question 37

In a factory operating at capacity,not every machine and person should be working at the maximum possible rate.

Question 38

Defective units should be detected and scrapped or reworked before the bottleneck operation rather than after it.

Question 39

One way to increase the effective utilization of a bottleneck is to put less emphasis on preventing defects and simply discard defective units at final inspection before sending them to customers.

Question 40

The term joint cost is used to describe the costs incurred after the split-off point in a process involving joint products.

Question 41

Wenig Inc.has some material that originally cost $73,500.The material has a scrap value of $45,600 as is,but if reworked at a cost of $6,600,it could be sold for $58,100.What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap?

A)decrease of $22,000
B)decrease of $67,600
C)increase of $51,500
D)increase of $5,900

Question 42

Lusk Corporation produces and sells 20,000 units of Product X each month.The selling price of Product X is $30 per unit,and variable expenses are $21 per unit.A study has been made concerning whether Product X should be discontinued.The study shows that $50,000 of the $250,000 in fixed expenses charged to Product X would not be avoidable even if the product was discontinued.If Product X is discontinued,the company's overall net operating income would:

A)decrease by $70,000 per month.
B)increase by $70,000 per month.
C)increase by $20,000 per month.
D)decrease by $20,000 per month.

Question 43

The management of Fannin Corporation is considering dropping product H58S.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 $90,000 of the fixed manufacturing expenses and $42,000 of the fixed selling and administrative expenses are avoidable if product H58S is discontinued.What would be the effect on the company's overall net operating income if product H58S were dropped?

A)Overall net operating income would decrease by $137,000.
B)Overall net operating income would increase by $137,000.
C)Overall net operating income would decrease by $151,000.
D)Overall net operating income would increase by $151,000.

Question 44

Claris Corporation (a multi-product company)produces and sells 7,000 units of Product X each year.Each unit of Product X sells for $12 and has a contribution margin of $4.If Product X is discontinued,$19,000 of the $32,000 in fixed costs charged to Product X could be eliminated.If Product X is discontinued,the company's overall operating income would:

A)decrease by $4,000 per year.
B)increase by $4,000 per year.
C)decrease by $9,000 per year.
D)increase by $9,000 per year.

Question 45

A study has been conducted to determine if one of the departments in Barry Corporation should be discontinued.The contribution margin in the department is $60,000 per year.Fixed expenses charged to the department are $75,000 per year.It is estimated that $34,000 of these fixed expenses could be eliminated if the department is discontinued.These data indicate that if the department is discontinued,the company's overall net operating income would:

A)decrease by $26,000 per year
B)increase by $26,000 per year
C)decrease by $15,000 per year
D)increase by $15,000 per year

Question 46

A study has been conducted to determine if Product A should be dropped.Sales of the product total $400,000 per year;variable expenses total $270,000 per year.Fixed expenses charged to the product total $160,000 per year.The company estimates that $70,000 of these fixed expenses are not avoidable even if the product is dropped.If Product A is dropped,the company's overall net operating income would:

A)decrease by $40,000 per year
B)increase by $40,000 per year
C)decrease by $30,000 per year
D)increase by $30,000 per year

Question 47

Mankus Inc.is considering using stocks of an old raw material in a special project.The special project would require all 120 kilograms of the raw material that are in stock and that originally cost the company $816 in total.If the company were to buy new supplies of this raw material on the open market,it would cost $7.25 per kilogram.However,the company has no other use for this raw material and would sell it at the discounted price of $6.75 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 $50 for all 120 kilograms.What is the relevant cost of the 120 kilograms of the raw material when deciding whether to proceed with the special project?

A)$810
B)$870
C)$760
D)$816

Question 48

Product Q77H has been considered a drag on profits at Zenke 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 $71,000 of the fixed manufacturing expenses and $43,000 of the fixed selling and administrative expenses are avoidable if product Q77H is discontinued.What would be the effect on the company's overall net operating income if product Q77H were dropped?

A)Overall net operating income would decrease by $95,000.
B)Overall net operating income would increase by $95,000.
C)Overall net operating income would increase by $4,000.
D)Overall net operating income would decrease by $4,000.

Question 49

The following information relates to next year's projected operating results of the Consumer Division of Xampa Corporation:
If the Consumer Division is eliminated,$1,600,000 of the above fixed expenses could be avoided.What will be the effect on Xampa's profit next year if Consumer Division is eliminated?

A)$300,000 increase
B)$300,000 increase
C)$200,000 decrease
D)$200,000 increase

Question 50

Yehle Inc.regularly uses material Y51B and currently has in stock 460 liters of the material for which it paid $2,530 several weeks ago.If this were to be sold as is on the open market as surplus material,it would fetch $4.55 per liter.New stocks of the material can be purchased on the open market for $5.45 per liter,but it must be purchased in lots of 1,000 liters.You have been asked to determine the relevant cost of 720 liters of the material to be used in a job for a customer.The relevant cost of the 720 liters of material Y51B is:

A)$3,924
B)$5,450
C)$3,510
D)$3,276

Question 51

The Milham Corporation has two divisions-East and West.The divisions have the following revenues and expenses:
Management at Milham 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 of:

A)$100,000
B)$80,000
C)$120,000
D)$50,000

Question 52

Vanikord Corporation currently has two divisions which had the following operating results for last year: Because the Rubber Division sustained a loss,the president of Vanikoro is considering the elimination of this division.All of the division's traceable fixed costs could be avoided if the division was dropped.None of the allocated common corporate fixed costs could be avoided.If the Rubber Division was dropped at the beginning of last year,how much higher or lower would Vanikoro's total net operating income have been for the year?

A)$20,000 higher
B)$50,000 higher
C)$50,000 lower
D)$30,000 lower

Question 53

Zuppa Corporation currently maintains its own printing department.The annual costs of running this department are as follows:
Somatic Copy Service has offered to provide Zuppa with all of its printing needs at a total annual cost of $68,000.If Zuppa went with this offer,they would close down their printing department.Except for 30% of the fixed costs,all of the annual printing department costs above can be avoided if it was closed down.Based on this information,would Zuppa be better off to keep its printing department or to shut it down and take Somatic's offer and by how much?

A)$4,000 better off to go with Somatic
B)$5,000 better off to keep the department
C)$20,000 better off to keep the department
D)$22,000 better off to go with Somatic

Question 54

Part S00 is used in one of Morsey Corporation's products.The company makes 6,000 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 $16.10 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 $6,000 of these allocated general overhead costs would be avoided.
If management decides to buy part S00 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 decrease by $3,000 per year.
B)Net operating income would decrease by $71,400 per year.
C)Net operating income would decrease by $77,400 per year.
D)Net operating income would decrease by $65,400 per year.

Question 55

Fabio Corporation is considering eliminating a department that has a contribution margin of $30,000 and $60,000 in fixed costs.Of the fixed costs,$15,000 cannot be avoided.The effect of eliminating this department on Fabio's overall net operating income would be:

A)a decrease of $30,000.
B)an increase of $30,000.
C)a decrease of $15,000.
D)an increase of $15,000.

Question 56

Roddey Corporation is a specialty component manufacturer with idle capacity.Management would like to use its extra capacity to generate additional profits.A potential customer has offered to buy 2,900 units of component GEE.Each unit of GEE requires 3 units of material R39 and 8 units of material I59.Data concerning these two materials follow:
Material R39 is in use in many of the company's products and is routinely replenished.Material I59 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up.
What would be the relevant cost of the materials,in total,for purposes of determining a minimum acceptable price for the order for product GEE?

A)$224,605
B)$196,765
C)$228,204
D)$193,285

Question 57

Zemlya Corporation currently records $4,000 of depreciation each year on the computer that it uses for its major data processing needs.The computer currently has one more year of useful life left and it will have a salvage value of zero at the end of that year.Jennifer,one of the accountants at Zemlya,suggested that the computer be sold immediately for $3,000 and that the company hire a data processing firm to handle the corporation's data processing needs.The computer currently requires $25,000 in annual operating costs in addition to the depreciation.The data processing firm would charge $10,000 per year for its services.If Zemlya decides to implement this change,what effect will this have on the corporation's net cash flow for the last year of the computer's useful life?

A)increase of $15,000
B)increase of $18,000
C)decrease of $22,000
D)decrease of $25,000

Question 58

Ramon Corporation makes 18,000 units of part E44 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 $23.30 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 $5,000 of these allocated general overhead costs would be avoided.In addition,the space used to produce part E44 would be used to make more of one of the company's other products,generating an additional segment margin of $21,000 per year for that product.
What would be the impact on the company's overall net operating income of buying part E44 from the outside supplier?

A)Net operating income would increase by $21,000 per year.
B)Net operating income would increase by $18,800 per year.
C)Net operating income would decrease by $123,000 per year.
D)Net operating income would decrease by $165,000 per year.

Question 59

Narciso Corporation is preparing a bid for a special order that would require 880 liters of material R19S.The company already has 280 liters of this raw material in stock that originally cost $6.10 per liter.Material R19S is used in the company's main product and is replenished on a periodic basis.The resale value of the existing stock of the material is $5.45 per liter.New stocks of the material can be readily purchased for $6.20 per liter.What is the relevant cost of the 880 liters of the raw material when deciding how much to bid on the special order?

A)$5,006
B)$5,456
C)$4,796
D)$5,456

Question 60

Weston Corporation is considering eliminating a department that has a contribution margin of $70,000 and $140,000 in fixed costs.Of the fixed costs,$100,000 cannot be avoided.The effect of eliminating this department on Weston's overall net operating income would be:

A)an increase of $70,000.
B)a decrease of $70,000.
C)an increase of $30,000.
D)a decrease of $30,000.

Question 61

Tish Corporation produces a part used in the manufacture of one of its products.The unit product cost is $26,computed as follows:
An outside supplier has offered to provide the annual requirement of 5,000 of the parts for only $21 each.The company estimates that 75% of the fixed manufacturing overhead cost above could be eliminated 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 from the outside supplier would be:

A)$1 disadvantage
B)$5 advantage
C)$3 advantage
D)$4 disadvantage

Question 62

Fahringer 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)XS,BJ,QR
B)QR,BJ,XS
C)BJ,QR,XS
D)QR,XS,BJ

Question 63

The constraint at Johngrass 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)$11.60 per minute
B)$14.10 per minute
C)$91.64 per unit
D)$22.24 per unit

Question 64

Consider the following production and cost data for two products,L and C:
The company can only perform 65,000 machine set-ups each period due to limited skilled labor and there is unlimited demand for each product.What is the largest possible total contribution margin that can be realized each period?

A)$845,000
B)$975,000
C)$910,000
D)$1,820,000

Question 65

Consider the following production and cost data for two products,Q and P:
A total of 24,000 machine minutes are 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)$144,000
C)$456,000
D)$132,000

Question 66

Teich Inc.is considering whether to continue to make a component or to buy it from an outside supplier.The company uses 15,000 of the components each year.The unit product cost of the component according to the company's absorption cost accounting system is given as follows:
Assume that direct labor is a variable cost.Of the fixed manufacturing overhead,10% is avoidable if the component were bought from the outside supplier;the remainder is not avoidable.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 $8.10 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)$15.55 per unit
B)$11.50 per unit
C)$19.15 per unit
D)$15.10 per unit

Question 67

Part A42 is used by Elgin Corporation to make one of its products.A total of 16,000 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 $30.40 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 A42 could be used to make more of one of the company's other products,generating an additional segment margin of $23,000 per year for that product.What would be the impact on the company's overall net operating income of buying part A42 from the outside supplier?

A)Net operating income would decrease by $23,400 per year.
B)Net operating income would decrease by $143,400 per year.
C)Net operating income would increase by $23,000 per year.
D)Net operating income would decrease by $189,400 per year.

Question 68

Palinkas Cane Products,Inc. ,processes sugar cane in batches.The company buys a batch of sugar cane from farmers for $80 which is then crushed in the company's plant at a cost of $11.Two intermediate products,cane fiber and cane juice,emerge from the crushing process.The cane fiber can be sold as is for $22 or processed further for $10 to make the end product industrial fiber that is sold for $30.The cane juice can be sold as is for $41 or processed further for $27 to make the end product molasses that is sold for $101.How much more profit (loss)does the company make by processing one batch of sugar cane into the end products industrial fiber and molasses?

A)$(128)
B)$3
C)$(28)
D)$31

Question 69

Gary Corporation produces products X,Y,and Z from a single raw material input.Budgeted data for the next month is as follows: If the cost of raw material input is $150,000,which of the products should be processed beyond the split-off point?

Question 70

Kampmann Corporation is presently making part Z95 that is used in one of its products.A total of 5,000 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 $24.10 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 Z95 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 decrease by $36,000 per year.
B)Net operating income would decrease by $34,000 per year.
C)Net operating income would increase by $34,000 per year.
D)Net operating income would increase by $36,000 per year.

Question 71

Kosakowski Corporation processes sugar beets in batches.A batch of sugar beets costs $66 to buy from farmers and $17 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 $23 or processed further for $13 to make the end product industrial fiber that is sold for $36.The beet juice can be sold as is for $42 or processed further for $20 to make the end product refined sugar that is sold for $84.How much more profit (loss)does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?

A)$(18)
B)$4
C)$22
D)$(116)

Question 72

Oruro Chemical Corporation manufactures a variety of household cleaners,solvents,and beverages.Because of a recent shortage of mytron,a key ingredient needed for three of its products,the corporation has to decide what amount of each product would be most advantageous to produce.Information related to the three products that use mytron are shown below: Assume that Oruro only has 3,000 ounces of mytron available next month.What is the maximum amount of contribution margin that Oruro can generate next month from the three products above given the shortage of mytron?

A)$16,000
B)$19,000
C)$21,000
D)$24,000

Question 73

Crooks Corporation processes sugar beets in batches that it purchases from farmers for $57 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 $28 or processed further for $17 to make the end product industrial fiber that is sold for $67.The beet juice can be sold as is for $39 or processed further for $24 to make the end product refined sugar that is sold for $54.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 be processed into industrial fiber;beet juice should NOT be processed into refined sugar
C)beet fiber should NOT be processed into industrial fiber;beet juice should be processed into refined sugar
D)beet fiber should NOT be processed into industrial fiber;beet juice should NOT be processed into refined sugar

Question 74

Manico Corporation produces three products -- X,Y,& Z -- with the following characteristics:
The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

A)orders for Z first,X second,and Y third
B)orders for X first,Z second,and Y third
C)orders for Y first,X second,and Z third
D)orders for Z first and no orders for X or Y

Question 75

Farnsworth Television makes and sells portable television sets.Each television regularly sells for $200.The following cost data per television are based on a full capacity of 12,000 televisions produced each period:
A special order has been received by Farnsworth for a sale of 2,500 televisions to an overseas customer.The only selling costs that would be incurred on this order would be $10 per television for shipping.Farnsworth is now selling 7,200 televisions through regular distributors each period.What should be the minimum selling price per television in negotiating a price for this special order?

A)$200
B)$166
C)$178
D)$176

Question 76

Hoang 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)RP,KI,LH
B)RP,LH,KI
C)KI,RP,LH
D)LH,RP,KI

Question 77

Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce.Gwinnett has the capacity to manufacture and sell 10,000 cases of sauce each year but is currently only manufacturing and selling 9,000.The following costs relate to annual operations at 9,000 cases:
Gwinnett normally sells its sauce for $30 per case.A local school district is interested in purchasing Gwinnett's excess capacity of 1,000 cases of sauce but only if they can get the sauce for $15 per case.This special order would not affect regular sales or total fixed costs or variable costs per unit.If this special order is accepted,Gwinnett's profits for the year will:

A)increase by $600
B)decrease by $1,000
C)decrease by $4,000
D)decrease by $6,600

Question 78

A customer has requested that Gamba Corporation fill a special order for 3,000 units of product Q41 for $25.00 a unit.While the product would be modified slightly for the special order,product Q41's normal unit product cost is $21.40:
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 Q41 that would increase the variable costs by $7.00 per unit and that would require an investment of $15,000 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)$(5,700)
B)$(21,300)
C)$(25,200)
D)$10,800

Question 79

Barrus Corporation makes 30,000 motors to be used in the productions of its power lawn mowers.The average cost per motor at this level of activity is as follows:
This motor has recently become available from an outside supplier for $25 per motor.If Barrus decides not to make the motors,none of the fixed manufacturing overhead would be avoidable and there would be no other use for the facilities.If Barrus decides to continue making the motor,how much higher or lower will the company's net operating income be than if the motors are purchased from the outside supplier? Assume that direct labor is a variable cost in this company.

A)$36,000 lower
B)$207,000 higher
C)$94,500 higher
D)$130,500 higher

Question 80

Wiacek Corporation has received a request for a special order of 4,000 units of product F65 for $26.60 each.Product F65's unit product cost is $25.80,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 F65 that would increase the variable costs by $3.00 per unit and that would require an investment of $23,000 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)$(31,800)
B)$3,800
C)$3,200
D)$(48,400)