Exam 7: Fraud, Internal Control, and Cash

When will the elimination of a product line have no effect on the company's overall profit?

Mallory Company manufactures widgets.Bowden Company has approached Mallory with a proposal to sell the company widgets at a price of $82,000 for 100,000 units.Mallory is currently making these components in its own factory.The following costs are associated with this part of the process when 100,000 units are produced: Direct material \ 31,000 Direct labor 29,000 Manufacturing overhead 40,000 Total \1 00,000 The manufacturing overhead consists of $16,000 of costs that will be eliminated if the components are no longer produced by Mallory.From Mallory's point of view, how much is the incremental cost or savings if the widgets are bought instead of made?

Which decision will involve no incremental revenues?

The cost to produce Part A was $20 per unit in 2016.During 2017, it has increased to $23 per unit.In 2017, Supplier Company has offered to supply Part A for $18 per unit.For the make-or-buy decision,

An important step in management's decision-making process is to determine and evaluate possible courses of action.

Marcus Company gathered the following data about the three products that it produces: Present Estimated Additional Estimated Sales Product SalesValue Processing Costs if Processed Further A \ 12,000 \ 8,000 \ 21,000 14,000 5,000 18,000 11,000 3,000 16,000 Which of the products should not be processed further?

The opportunity cost of an alternate course of action that is relevant to a make-or-buy decision is

A company should never accept an order for its product at less than its regular sales price.

Sandusky Inc.has the following costs when producing 100,000 units: Variable costs \ 600,000 Fixed costs 900,000 An outside supplier is interested in producing the item for Sandusky.If the item is produced outside, Sandusky could use the released production facilities to make another item that would generate $150,000 of net income.At what unit price would Sandusky accept the outside supplier's offer if Sandusky wanted to increase net income by $120,000?

Which of the following terms are synonymous?

Use the following information for questions Truckel, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: Direct materials and direct labor \ 11 Variable overhead 5 Fixed overhead \ 8 Total -The fixed overhead is an allocated common cost.How much is the relevant cost of the wicket?

Serene Dairy has four product lines: sour cream, ice cream, yogurt, and butter.The total cost of producing the milk base for the products is $45,000, which has been allocated based on the gallons of milk base used by each product.Results for July follow: $\begin{array}{lrrrrr}&\text {Sour Cream}&\text {Ice Cream}&\text {Yogurt}&\text {Butter}&\text {Total}\\\hline\text { Units sold } & 2,000 & 500 & 400 & 2,000 & 4,900 \\\text { Revenue } & \$ 10,000 & \$ 20,000 & \$ 10,000 & \$ 20,000 & \$ 60,000 \\\text { Variable departmental costs } & 6,000 & 13,000 & 4,200 & 4,800 & 28,000 \\\text { Fixed costs } & 5,000 & 2,000 & 3,000 & 7,000 & 17,000 \\\text { Net income (loss) }&\$(1,000)&\$5,000&\$2,800&\$8,200&\$15,000\end{array}$ How much are total joint costs of the products?

From a quantitative standpoint, a segment should be eliminated if its contribution margin is less than the fixed costs that can be eliminated.

Which of the following is an irrelevant cost?

Crigui Music produces 60,000 CDs on which to record music.The CDs have the following costs: Direct Materials \ 13,000 Direct Labor 15,000 Variable Overhead 3,000 Fixed Overhead 7,000 Crigui could avoid $4,000 in fixed overhead costs if it acquires the CDs externally.If cost minimization is the major consideration and the company would prefer to buy the 60,000 units externally, what is the maximum external price that Crigui would expect to pay for the units?

Each of the following is a disadvantage of buying rather than making a component of a company's product except that

Martin Company incurred the following costs for 70,000 units: Variable costs $\quad\$ 420,000$ Fixed costs $\quad 392,000$ Martin has received a special order from a foreign company for 3,000 units.There is sufficient capacity to fill the order without jeopardizing regular sales.Filling the order will require spending an additional $6,300 for shipping. If Martin wants to earn $6,000 on the order, what should the unit price be?

Use the following information for questions Paul Bunyon Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period: Sales Value Additional Sales Value after Product at Split-off Variable Costs Further Processing Green lumber \ 159,600 \ 24,000 \ 178,000 Rough lumber 124,000 28,200 173,600 Sawdust 102,000 19.600 130,000 -Which products should be processed further?

Alvarez Company is considering the following alternatives: Alternative A Alternative B Revenues \ 50,000 \ 60,000 Variable costs 30,000 30,000 Fixed costs 10,000 16,000 What is the incremental profit?

Baden Company manufactures a product with a unit variable cost of $100 and a unit sales price of $176.Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold.The company has a one-time opportunity to sell an additional 1,000 units at $140 each in a foreign market which would not affect its present sales.If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows: