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Elgot Company produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 30,000 units per month is as follows: Elgot Company produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 30,000 units per month is as follows: The normal selling price of the product is $51.10 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 have no effect on the company's normal sales and would not change the total amount of the company's fixed costs.The variable selling and administrative expense would be $0.50 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 $44.70 per unit.By how much would this special order increase (decrease) the company's net operating income for the month? A) $5,100 B) $(14,100) C) $36,900 D) $(17,700) The normal selling price of the product is $51.10 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 have no effect on the company's normal sales and would not change the total amount of the company's fixed costs.The variable selling and administrative expense would be $0.50 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 $44.70 per unit.By how much would this special order increase (decrease) the company's net operating income for the month?


A) $5,100
B) $(14,100)
C) $36,900
D) $(17,700)

E) A) and C)
F) All of the above

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Brittman Corporation makes three products that use the current constraint-a particular type of machine.Data concerning those products appear below: Brittman Corporation makes three products that use the current constraint-a particular type of machine.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) IP,YD,NI B) YD,NI,IP C) YD,IP,NI D) NI,YD,IP -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) IP,YD,NI
B) YD,NI,IP
C) YD,IP,NI
D) NI,YD,IP

E) B) and C)
F) A) and B)

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The Tolar Company 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. -The sunk cost in this situation is:


A) $10,000
B) $26,800
C) $11,200
D) $0

E) All of the above
F) None of the above

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Two alternatives,code-named X and Y,are under consideration at Donat Corporation.Costs associated with the alternatives are listed below. Two alternatives,code-named X and Y,are under consideration at Donat Corporation.Costs associated with the alternatives are listed below. -What is the differential cost of Alternative Y over Alternative X,including all of the relevant costs? A) $140,000 B) $123,000 C) $34,000 D) $106,000 -What is the differential cost of Alternative Y over Alternative X,including all of the relevant costs?


A) $140,000
B) $123,000
C) $34,000
D) $106,000

E) A) and B)
F) B) and D)

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Rackett Corporation is considering two alternatives that are code-named M and N.Costs associated with the alternatives are listed below: Rackett Corporation is considering two alternatives that are code-named M and N.Costs associated with the alternatives are listed below: Required: a.Which costs are relevant and which are not relevant in the choice between these two alternatives? b.What is the differential cost between the two alternatives? Required: a.Which costs are relevant and which are not relevant in the choice between these two alternatives? b.What is the differential cost between the two alternatives?

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Two alternatives,code-named X and Y,are under consideration at Donat Corporation.Costs associated with the alternatives are listed below. Two alternatives,code-named X and Y,are under consideration at Donat Corporation.Costs associated with the alternatives are listed below. -Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question. ) A) Both materials costs and processing costs are relevant B) Only materials costs are relevant C) Only processing costs are relevant D) Neither materials costs nor processing costs are relevant -Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question. )


A) Both materials costs and processing costs are relevant
B) Only materials costs are relevant
C) Only processing costs are relevant
D) Neither materials costs nor processing costs are relevant

E) C) and D)
F) A) and B)

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Creelman Company makes four products in a single facility.Data concerning these products appear below: Creelman Company makes four products in a single facility.Data concerning these products appear below: The milling machines are potentially the constraint in the production facility.A total of 13,000 minutes are available per month on these machines. -Which product makes the MOST profitable use of the milling machines? A) Product A B) Product B C) Product C D) Product D The milling machines are potentially the constraint in the production facility.A total of 13,000 minutes are available per month on these machines. -Which product makes the MOST profitable use of the milling machines?


A) Product A
B) Product B
C) Product C
D) Product D

E) A) and D)
F) A) and C)

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Variable costs are always relevant costs.

A) True
B) False

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Lounsberry Inc.regularly uses material O55P and currently has in stock 360 liters of the material for which it paid $2,484 several weeks ago.If this were to be sold as is on the open market as surplus material,it would fetch $6.35 per liter.New stocks of the material can be purchased on the open market for $6.90 per liter,but it must be purchased in lots of 1,000 liters.You have been asked to determine the relevant cost of 800 liters of the material to be used in a job for a customer.The relevant cost of the 800 liters of material O55P is:


A) $5,080
B) $5,322
C) $5,520
D) $6,900

E) A) and C)
F) A) and B)

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Kleffman Corporation is presently making part X31 that is used in one of its products.A total of 2,000 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: Kleffman Corporation is presently making part X31 that is used in one of its products.A total of 2,000 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 produce and sell the part to the company for $23.40 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 $1,000 of these allocated general overhead costs would be avoided. -In addition to the facts given above,assume that the space used to produce part X31 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 X31 from the outside supplier and using the freed space to make more of the other product? A) Net operating income would increase by $17,400 per year. B) Net operating income would increase by $21,200 per year. C) Net operating income would decline by $28,600 per year. D) Net operating income would increase by $23,000 per year. An outside supplier has offered to produce and sell the part to the company for $23.40 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 $1,000 of these allocated general overhead costs would be avoided. -In addition to the facts given above,assume that the space used to produce part X31 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 X31 from the outside supplier and using the freed space to make more of the other product?


A) Net operating income would increase by $17,400 per year.
B) Net operating income would increase by $21,200 per year.
C) Net operating income would decline by $28,600 per year.
D) Net operating income would increase by $23,000 per year.

E) None of the above
F) B) and D)

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A customer has asked Clougherty Corporation to supply 4,000 units of product M97,with some modifications,for $40.10 each.The normal selling price of this product is $48.00 each.The normal unit product cost of product M97 is computed as follows: A customer has asked Clougherty Corporation to supply 4,000 units of product M97,with some modifications,for $40.10 each.The normal selling price of this product is $48.00 each.The normal unit product cost of product M97 is computed 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 some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 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. Required: Determine the effect on the company's total net operating income of accepting the special order.Show your work! 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 some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 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. Required: Determine the effect on the company's total net operating income of accepting the special order.Show your work!

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The management of Zorrilla Corporation is considering dropping product R10C.Data from the company's accounting system appear below: The management of Zorrilla Corporation is considering dropping product R10C.Data from the company's accounting system appear below: All fixed expenses of the company are fully allocated to products in the company's accounting system.Further investigation has revealed that $42,000 of the fixed manufacturing expenses and $48,000 of the fixed selling and administrative expenses are avoidable if product R10C is discontinued. -What would be the effect on the company's overall net operating income if product R10C were dropped? A) Overall net operating income would decrease by $28,000. B) Overall net operating income would decrease by $45,000. C) Overall net operating income would increase by $28,000. D) Overall net operating income would increase by $45,000. All fixed expenses of the company are fully allocated to products in the company's accounting system.Further investigation has revealed that $42,000 of the fixed manufacturing expenses and $48,000 of the fixed selling and administrative expenses are avoidable if product R10C is discontinued. -What would be the effect on the company's overall net operating income if product R10C were dropped?


A) Overall net operating income would decrease by $28,000.
B) Overall net operating income would decrease by $45,000.
C) Overall net operating income would increase by $28,000.
D) Overall net operating income would increase by $45,000.

E) All of the above
F) B) and C)

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Vanikoro Corporation currently has two divisions which had the following operating results for last year: Vanikoro Corporation currently has two divisions which had the following operating results for last year: Since the Rubber Division sustained a loss,the president of Vanikoro is considering the elimination of this division.All of the fixed costs for the division could be eliminated if the division was dropped.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) $10,000 higher B) $40,000 lower C) $50,000 higher D) $100,000 lower Since the Rubber Division sustained a loss,the president of Vanikoro is considering the elimination of this division.All of the fixed costs for the division could be eliminated if the division was dropped.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) $10,000 higher
B) $40,000 lower
C) $50,000 higher
D) $100,000 lower

E) B) and C)
F) A) and B)

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A year ago,Crunchy Cola Corporation bought a stamping machine to make the cans for its cola.The cost of the machine was $60,000.The machine has a useful life of 5 years and a salvage value of zero at the end of those five years.Annual depreciation on the machine is $12,000.One year of depreciation has been recorded.The variable manufacturing cost of producing the cans is $0.05 per can.The only fixed manufacturing cost is the annual depreciation of $12,000 on the stamping machine.Crunchy needs 200,000 cans annually.Dagmar Stamping Company recently gave Crunchy an offer to supply all of its can needs for the next four years at $0.07 per can.If Crunchy buys from Dagmar,the stamping machine would not be needed and would be sold for $35,000.If Crunchy buys from Dagmar,what will be the total dollar increase or decrease in income for the next four years?


A) $16,000 decrease
B) $19,000 increase
C) $29,000 decrease
D) $32,000 increase

E) B) and C)
F) A) and D)

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Elgot Company produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 30,000 units per month is as follows: Elgot Company produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 30,000 units per month is as follows: The normal selling price of the product is $51.10 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 have no effect on the company's normal sales and would not change the total amount of the company's fixed costs.The variable selling and administrative expense would be $0.50 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. -Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,200 units for regular customers.The minimum acceptable price per unit for the special order is closest to: A) $51.10 B) $39.68 C) $40.90 D) $49.40 The normal selling price of the product is $51.10 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 have no effect on the company's normal sales and would not change the total amount of the company's fixed costs.The variable selling and administrative expense would be $0.50 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. -Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,200 units for regular customers.The minimum acceptable price per unit for the special order is closest to:


A) $51.10
B) $39.68
C) $40.90
D) $49.40

E) A) and B)
F) A) and C)

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Managers should pay little attention to bottleneck operations because they have limited capacity for producing output.

A) True
B) False

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Products A,B,and C are produced from a single raw material input.The raw material costs $90,000,from which 5,000 units of A,10,000 units of B,and 15,000 units of C can be produced each period.Product A can be sold at the split-off point for $2 per unit,or it can be processed further at a cost of $12,500 and then sold for $5 per unit.Product A should be:


A) sold at the split-off point,since further processing would result in a loss of $0.50 per unit.
B) processed further,since this will increase profits by $2,500 each period.
C) sold at the split-off point,since further processing will result in a loss of $2,500 each period.
D) processed further,since this will increase profits by $12,500 each perioD. Products A,B,and C are produced from a single raw material input.The raw material costs $90,000,from which 5,000 units of A,10,000 units of B,and 15,000 units of C can be produced each period.Product A can be sold at the split-off point for $2 per unit,or it can be processed further at a cost of $12,500 and then sold for $5 per unit.Product A should be: A) sold at the split-off point,since further processing would result in a loss of $0.50 per unit. B) processed further,since this will increase profits by $2,500 each period. C) sold at the split-off point,since further processing will result in a loss of $2,500 each period. D) processed further,since this will increase profits by $12,500 each perioD.

E) B) and C)
F) A) and C)

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The management of Dorl Corporation has been concerned for some time with the financial performance of its product I54J and has considered discontinuing it on several occasions.Data from the company's accounting system appear below: The management of Dorl Corporation has been concerned for some time with the financial performance of its product I54J and has considered discontinuing it on several occasions.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 $95,000 of the fixed manufacturing expenses and $85,000 of the fixed selling and administrative expenses are avoidable if product I54J is discontinued. -What would be the effect on the company's overall net operating income if product I54J were dropped? A) Overall net operating income would decrease by $177,000. B) Overall net operating income would increase by $177,000. C) Overall net operating income would increase by $14,000. D) Overall net operating income would decrease by $14,000. In the company's accounting system all fixed expenses of the company are fully allocated to products.Further investigation has revealed that $95,000 of the fixed manufacturing expenses and $85,000 of the fixed selling and administrative expenses are avoidable if product I54J is discontinued. -What would be the effect on the company's overall net operating income if product I54J were dropped?


A) Overall net operating income would decrease by $177,000.
B) Overall net operating income would increase by $177,000.
C) Overall net operating income would increase by $14,000.
D) Overall net operating income would decrease by $14,000.

E) A) and D)
F) None of the above

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Kava Inc.manufactures industrial components.One of its products,which is used in the construction of industrial air conditioners,is known as K65.Data concerning this product are given below: Kava Inc.manufactures industrial components.One of its products,which is used in the construction of industrial air conditioners,is known as K65.Data concerning this product are given below: The above per unit data are based on annual production of 4,000 units of the component.Direct labor can be considered to be a variable cost. -The company has received a special,one-time-only order for 500 units of component K65.There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order.Assuming that Kava has excess capacity and can fill the order without cutting back on the production of any product,what is the minimum price per unit on the special order below which the company should not go? A) $180 B) $38 C) $59 D) $78 The above per unit data are based on annual production of 4,000 units of the component.Direct labor can be considered to be a variable cost. -The company has received a special,one-time-only order for 500 units of component K65.There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order.Assuming that Kava has excess capacity and can fill the order without cutting back on the production of any product,what is the minimum price per unit on the special order below which the company should not go?


A) $180
B) $38
C) $59
D) $78

E) B) and C)
F) A) and B)

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United Industries manufactures a number of products at its highly automated factory.The products are very popular,with demand far exceeding the factory's capacity.To maximize profit,management should rank products based on their:


A) gross margin
B) contribution margin
C) selling price
D) contribution margin per unit of the constrained resource

E) B) and C)
F) All of the above

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