Galley Industries can produce 500 units of a necessary component part with the following costs: \[\begin{array} { l c } \text { Direct Materials } & \$ 75,000 \\ \text { Direct Labour } & 20,000 \\ \text { Variable Overhead } & 60,000 \\ \text { Fixed Overhead } & 10,000 \end{array}\] If Galley Industries purchases the component externally, $3,000 of the fixed costs can be avoided.Below what external price for the 500 units would Galley choose to buy instead of make?

A) $95,000 B) $165,000 C) $155,000 D) $158,000 A) $95,000 B) $165,000 C) $155,000 D) $158,000

Use the following information for questions Hermantic, Inc.can produce 100 units of a component part with the following costs: \[\begin{array} { l c } \text { Direct Materials } & \$ 30,000 \\ \text { Direct Labour } & 13,000 \\ \text { Variable Overhead } & 32,000 \\ \text { Fixed Overhead } & \mathbf { 2 2 , 0 0 0 } \end{array}\] -If Hermantic, Inc.purchases the units externally for $80,000, by what amount will its total costs change? Fixed costs are not avoidable if they purchase externally.

A) an increase of $80,000 B) an increase of $5,000 C) an increase of $17,000 D) a decrease of $22,000 A) an increase of $80,000 B) an increase of $5,000 C) an increase of $17,000 D) a decrease of $22,000

Peters, Inc.produces chocolate chip cookies.Costs for producing one batch appear below: \[\begin{array} { l l } \text { Direct materials } & \$8.00 \\ \text { Direct labour } & 3.00 \\ \text { Variable overhead } & 1.00 \\ \text { Fixed overhead } & 4.00 \end{array}\] An outside supplier has offered to produce the cookies for $14 per batch.If Peters decides to buy instead of make the cookies, what is the maximum price it would pay?

A) $16.00 B) $12.00 C) $13.60 D) $14.40 A) $16.00 B) $12.00 C) $13.60 D) $14.40

Specik, Inc.is considering the following alternatives: $\begin{array}{lll} &\underline{\text {Alternative1}}& \underline{\text {Alternative2}}\\ \text { Revenues } & \$ 120,000 & \$ 120,000 \\ \text { Variable costs } & 60,000 & 65,000 \\ \text { Fixed costs } & 35,000 & 39,000 \end{array}$ Which of the following are relevant in choosing between the alternatives?

A) variable costs B) revenues C) fixed costs D) variable costs and fixed costs A) variable costs B) revenues C) fixed costs D) variable costs and fixed costs

Exam 7: Incremental Analysis

Harrison Company determines that an opportunity cost of an alternate course of action is relevant to a make-or-buy decision.Which statement is true of the opportunity cost?

(Multiple Choice)

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Question 61

A company has a process that results in 1,000 kilograms of Product X that can be sold for $10 per kilogram.An alternative would be to process Product X further at a cost of $2,000 and then sell it for $13 per kilogram.Should management sell Product X now or should Product X be processed further and then sold?

(Multiple Choice)

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Question 62

Costs that are common to two or more products are considered to be

(Multiple Choice)

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Question 63

Corn Crunchers has three product lines.Its only unprofitable line is Corn Nuts, the results of which appear below for 2020: $\begin{array}{ll}\text { Sales } & \$ 350,000 \\\text { Variable expenses } & 230,000 \\\text { Fixed expenses } & \underline{180,000} \\\text { Net loss } & \$(60,000)\end{array}$ 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?

(Multiple Choice)

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Question 64

Which one of the following stages of the management decision-making process is properly sequenced?

(Multiple Choice)

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Question 65

The cost to produce Part A was $5 per unit in 2019.During 2020, it has increased to $8 per unit.In 2020, Supplier Company has offered to supply Part A for $6 per unit.For the make-or-buy decision,

(Multiple Choice)

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Question 66

Costs that are common to one or more products are called

(Multiple Choice)

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Question 67

Galley Industries can produce 500 units of a necessary component part with the following costs: Direct Materials \ 75,000 Direct Labour 20,000 Variable Overhead 60,000 Fixed Overhead 10,000 If Galley Industries purchases the component externally, $3,000 of the fixed costs can be avoided.Below what external price for the 500 units would Galley choose to buy instead of make?

(Multiple Choice)

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Question 68

M&H Ltd.has sufficient capacity to fill an order at a special price below its usual price.The special price exceeds its variable costs.What non-financial factors should also be considered in the decision?

(Multiple Choice)

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Question 69

Use the following information for questions Hermantic, Inc.can produce 100 units of a component part with the following costs: Direct Materials \ 30,000 Direct Labour 13,000 Variable Overhead 32,000 Fixed Overhead -If Hermantic, Inc.purchases the units externally for $80,000, by what amount will its total costs change? Fixed costs are not avoidable if they purchase externally.

(Multiple Choice)

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Question 70

What non-financial factors should be considered when making a decision about buying rather than making a component of a company's product?

(Multiple Choice)

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Question 71

Peters, Inc.produces chocolate chip cookies.Costs for producing one batch appear below: Direct materials \8 .00 Direct labour 3.00 Variable overhead 1.00 Fixed overhead 4.00 An outside supplier has offered to produce the cookies for $14 per batch.If Peters decides to buy instead of make the cookies, what is the maximum price it would pay?

(Multiple Choice)

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Question 72

It costs Fortune Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35.A foreign wholesaler offers to purchase 1,000 scales at $16 each.Fortune would incur special shipping costs of $2 per scale if the order were accepted.Fortune has sufficient unused capacity to produce the 1,000 scales.If the special order is accepted, what will be the effect on net income?

(Multiple Choice)

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Question 73

A company is within plant capacity.It is contemplating whether a special order should be accepted.The order will not impact regular sales.If the company accepts a special order, what will occur?

(Multiple Choice)

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Question 74

What is the nature of an opportunity cost?

(Multiple Choice)

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Question 75

EKP purchased a raw material in bulk for $10,000.It then spent an additional $500 to package the product into smaller quantities which it can sell for $12,000.Recently, a situation has arisen in which EKP can add an additional ingredient to the individual packages and sell them for $14,000.The cost of adding the additional ingredient is $1,700.Which amounts are relevant to the decision?

(Multiple Choice)

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Question 76

Specik, Inc.is considering the following alternatives: Revenues \ 120,000 \ 120,000 Variable costs 60,000 65,000 Fixed costs 35,000 39,000 Which of the following are relevant in choosing between the alternatives?

(Multiple Choice)

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Question 77

A company is deciding whether or not to replace some old equipment with new equipment.Which of the following is not considered in the incremental analysis?

(Multiple Choice)

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Question 78

For which of the following is incremental analysis appropriate?

(Multiple Choice)

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Question 79

Harrison Company determines that an opportunity cost of an alternate course of action is relevant to a make-or-buy decision.Which statement is true of the opportunity cost?

Costs that are common to two or more products are considered to be

Which one of the following stages of the management decision-making process is properly sequenced?

The cost to produce Part A was $5 per unit in 2019.During 2020, it has increased to $8 per unit.In 2020, Supplier Company has offered to supply Part A for $6 per unit.For the make-or-buy decision,

Costs that are common to one or more products are called

M&H Ltd.has sufficient capacity to fill an order at a special price below its usual price.The special price exceeds its variable costs.What non-financial factors should also be considered in the decision?

What non-financial factors should be considered when making a decision about buying rather than making a component of a company's product?

A company is within plant capacity.It is contemplating whether a special order should be accepted.The order will not impact regular sales.If the company accepts a special order, what will occur?

What is the nature of an opportunity cost?

Specik, Inc.is considering the following alternatives: Revenues \ 120,000 \ 120,000 Variable costs 60,000 65,000 Fixed costs 35,000 39,000 Which of the following are relevant in choosing between the alternatives?

A company is deciding whether or not to replace some old equipment with new equipment.Which of the following is not considered in the incremental analysis?

For which of the following is incremental analysis appropriate?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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