Chapter 13 Quiz Flashcards
Which of the following would be relevant in the decision to sell or throw out obsolete inventory?
DM Cost assigned FOH Cost assigned A) Yes, Yes B) Yes, No C) No, Yes D) No, No
A) Choice A
B) Choice B
C) Choice C
D) Choice D
Choice D
Product X-547 is one of the joint products in a joint manufacturing process. Management is considering whether to sell X-547 at the split-off point or to process X-547 further into Xylene. The following data have been gathered:
- Selling price of X-547
- Variable cost of processing X-547 into Xylene.
- The avoidable fixed costs of processing X-547 into Xylene.
- The selling price of Xylene.
- The joint cost of the process from which X-547 is produced.
Which of the above items are relevant in a decision of whether to sell the X-547 as is or process it further into Xylene?
A) I, II, and IV.
B) I, II, III, and IV.
C) II, III, and V.
D) I, II, III, and V.
I, II, III, and IV
One of the employees of Davenport Corporation recently was involved in an accident with one of the corporation’s delivery vans. The corporation is either going to repair the damaged van or sell it as is and buy a comparable used van. Information related to this decision is provided below:
Initial cost of the damaged van= $30,000
Accumulated depreciation to date on van= $18,000
Salvage value of van immediately before crash= $9,000
Salvage value of van immediately after crash= $1,000
Cost to repair damaged van= $5,000
Cost of a comparable used van= $10,000
Based on the information above, Davenport would be financially better off:
A) $1,000 by buying the comparable van.
B) $2,000 by buying the comparable van.
C) $2,000 by repairing the damaged van.
D) $4,000 by repairing the damaged van.
$4,000 by repairing the damaged van.
Lusk Corporation produces and sells 14,000 units of Product X each month. The selling price of Product X is $22 per unit, and variable expenses are $16 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $73,000 of the $103,000 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:
A) ($54,000)
B) $19,000
C) $49,000
D) ($49,000)
($54,000)
Norgaard Corporation makes 8,000 units of part G25 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:
Per Unit Direct materials $6.70 Direct labor $8.10 Variable manufacturing overhead $1.10 Supervisor's salary $2.00 Depreciation of special equipment $4.20 Allocated general overhead $2.10
An outside supplier has offered to make and sell the part to the company for $21.20 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 $2,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part G25 would be used to make more of one of the company’s other products, generating an additional segment margin of $16,000 per year for that product.
The annual financial advantage (disadvantage) for the company as a result of buying part G25 from the outside supplier should be:
A) ($8,400)
B) $16,000
C) ($8,000)
D) ($40,000)
($8,400)
CoolAir Corporation manufactures portable window air conditioners. CoolAir has the capacity to manufacture and sell 80,000 air conditioners each year but is currently only manufacturing and selling 60,000. The following per unit numbers relate to annual operations at 60,000 units:
Per Unit
Selling price $125
Manufacturing costs:
Variable $25
Fixed $40
Selling and administrative costs:
Variable $10
Fixed $15
The City of Clearwater would like to purchase 3,000 air conditioners from CoolAir but only if they can get them for $75 each. Variable selling and administrative costs on this special order will drop down to $2 per unit. This special order will not affect the 60,000 regular sales and it will not affect the total fixed costs. The annual financial advantage (disadvantage) for the company as a result of accepting this special order from the City of Clearwater should be:
A) ($21,000)
B) $24,000
C) $144,000
D) ($129,000)
$144,000
Wood Carving Corporation manufactures three products. Because of a recent lack of skilled wood carvers, the corporation has had a shortage of available labor hours. The following per unit data relates to the three products of the corporation:
Letter Elvis Candle Selling price $30 $80 $42 Variable cost $20 $40 $20 Labor hours required 1 6 2
Assume that Wood Carving only has 1,800 labor hours available next month. Also assume that Wood Carving can only sell 800 units of each product in a given month. What is the maximum amount of contribution margin that Wood Carving can generate next month given this labor hour shortage?
A) $12,000
B) $19,000
C) $19,600
D) $19,800
$19,600
