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51 the incremental costs of producing one more unit of product include all of the fo 4300598

 

51) The incremental costs of producing one more unit of product include all of the following EXCEPT:

A) direct materials

B) direct labor

C) variable overhead costs

D) fixed overhead costs

52) Direct materials are $20, direct labor is $5, variable overhead costs are $15, and fixed overhead costs are $10. In the short term, the incremental cost of one unit is:

A) $15

B) $25

C) $40

D) $50

 

53) Unit cost data can most mislead decisions by:

A) not computing fixed overhead costs

B) computing labor and materials costs only

C) computing administrative costs

D) not computing unit costs at the same output level

 

54) Schmidt Sewing Company incorporates the services of Deb's Sewing. Schmidt purchases pre-cut dresses from Deb's. This is primarily known as:

A) insourcing

B) outsourcing

C) relevant costing

D) sunk costing

 

55) Smiley Face Company manufactures signs from direct materials to the finished product. This is considered:

A) insourcing

B) outsourcing

C) relevant costing

D) sunk costing

56) Which of the following would NOT be considered in a make-or-buy decision?

A) fixed costs that will no longer be incurred

B) variable costs of production

C) potential rental income from space occupied by the production area

D) unchanged supervisory costs

 

Answer the following questions using the information below:

 

Donald's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:

 

Direct materials$ 20,000

Direct labor5,000

Variable overhead costs15,000

Fixed overhead costs10,000

Total costs$50,000

 

It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Donald's Engine Company has the option of purchasing the part from an outside supplier at $42.50 per unit.

 

57) If Donald's Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total:

A) $ 41,000

B) $ 49,000

C) $ 25,000

D) $50,000

58) If Donald's Engine Company purchases 1,000 TE456 parts from the outside supplier per month, then its monthly operating income will:

A) increase by $1,000

B) increase by $40,000

C) decrease by $1,500

D) decrease by $42,500

 

59) The maximum price that Donald's Engine Company should be willing to pay the outside supplier is:

A) $40 per TE456 part

B) $41 per TE456 part

C) $49 per TE456 part

D) $50 per TE456 part

Answer the following questions using the information below:

 

Piels Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:

 

Direct materials$ 90,000

Direct labor130,000

Variable factory overhead60,000

Fixed factory overhead140,000

Total costs$420,000

 

Of the fixed factory overhead costs, $60,000 is avoidable.

 

60) Conners Company has offered to sell 10,000 units of the same part to Piels Corporation for $36 per unit. Assuming there is no other use for the facilities, Schmidt should:

A) make the part, as this would save $6 per unit

B) buy the part, as this would save $6 per unit

C) buy the part, as this would save the company $60,000

D) make the part, as this would save $2 per unit

 

 

 

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