Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: \[\begin{array} { l r } \text { Direct Materials } & \$ 120,000 \\ \text { Direct Labor } & 25,000 \\ \text { Variable Overhead } & 45,000 \\ \text { Fixed Overhead } & 30,000 \end{array}\] If Tex's Manufacturing Company can purchase the component externally for $190,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

A) Buy and save $5,000 B) Make and save $5,000 C) Make and save $15,000 D) Buy and save $15,000 A) Buy and save $5,000 B) Make and save $5,000 C) Make and save $15,000 D) Buy and save $15,000

Corn Crunchers has three product lines.Its only unprofitable line is Corn Nuts, the results of which appear below for 2013: \[\begin{array} { l r } \text { Sales } & \$ 1,400,000 \\ \text { Variable expenses } & 920,000 \\ \text { Fixed expenses } & 600,000 \\ \text { Net loss } & \$ ( 120,000 ) \end{array}\] 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?

A) $180,000 B) $1,520,000 C) $1,340,000 D) $1,100,000 A) $180,000 B) $1,520,000 C) $1,340,000 D) $1,100,000

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: $\begin{array}{lrrr}& \text { Sales Value } & \text { Additional } & \text { Sales Value after } \\ \text { Product } & \text { at Split-off } & \text { Variable Costs } & \text { Further Processing }\\\hline \text { Green lumber } & \$ 159,600 & \$ 24,000 & \$ 178,000 \\ \text { Rough lumber } & 124,000 & 28,200 & 173,600 \\ \text { Sawdust } & 102,000 & 19.600 & 130,000 \end{array}$ -The additional profit that would result from processing rough lumber further is

A) $21,400. B) $49,600. C) $145,400. D) $95,800. A) $21,400. B) $49,600. C) $145,400. D) $95,800.

Tasty Bites produces corn chips.The cost of one batch is below: \[\begin{array} { l r } \text { Direct materials } & \$ 18 \\ \text { Direct labor } & 13 \\ \text { Variable overhead } & 11 \\ \text { Fixed overhead } & 14 \end{array}\] An outside supplier has offered to produce the corn chips for $30 per batch.How much will Tasty Bites save if it accepts the offer?

A) $15 per batch B) $12 per batch C) $26 per batch D) $1 per batch A) $15 per batch B) $12 per batch C) $26 per batch D) $1 per batch

Use the following information for questions Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: \[\begin{array} { l r } \text { Direct materials } & \$ 55,000 \\ \text { Direct labor } & 160,000 \\ \text { Variable overhead } & 75,000 \\ \text { Fixed overhead } & 175,000 \end{array}\] If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable. -What is the relevant cost per unit of part A12E?

A) $58 B) $85 C) $93 D) $66 A) $58 B) $85 C) $93 D) $66

Sala Co.is contemplating the replacement of an old machine with a new one.The following information has been gathered: $\begin{array}{lrr}&\text { Old Machine }&\text { New Machine }\\ \text { Price } & \$ 300,000 & \$ 600,000 \\ \text { Accumulated Depreciation } & 90,000 & -0- \\ \text { Remaining useful life } & 10 \text { years } & -0- \\ \text { Useful life } & -0- & 10 \text { years } \\ \text { Annual operating costs } & \$ 240,000 & \$ 180,600 \end{array}$ If the old machine is replaced, it can be sold for $24,000. The net advantage (disadvantage) of replacing the old machine is

A) $18,000 B) $24,000 C) $(6,000) D) $(60,000) A) $18,000 B) $24,000 C) $(6,000) D) $(60,000)

Exam 7: Fraud, Internal Control, and Cash

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: Direct Materials \ 120,000 Direct Labor 25,000 Variable Overhead 45,000 Fixed Overhead 30,000 If Tex's Manufacturing Company can purchase the component externally for $190,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

(Multiple Choice)

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Question 121

Corn Crunchers has three product lines.Its only unprofitable line is Corn Nuts, the results of which appear below for 2013: Sales \ 1,400,000 Variable expenses 920,000 Fixed expenses 600,000 Net loss \ (120,000) 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 122

A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units: Direct materials \ 4 Direct labor 10 Variable overhead 8 Fixed overhead 6 A foreign company wants to purchase 2,000 units at a special unit price of $25.The normal price per unit is $40.In addition, a special stamping machine will have to be purchased for $4,000 in order to stamp the foreign company's name on the product.The incremental income (loss) from accepting the order is

(Multiple Choice)

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Question 123

A company is contemplating the acceptance of a special order.The order would not affect regular sales and could be filled without exceeding plant capacity.However, a new stamping machine would have to be purchased in order to stamp the customer's name on the product.Which of the following is likely?

(Multiple Choice)

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Question 124

Use the following information for questions A company's unit costs based on 100,000 units are: Variable costs \ 75 Fixed costs 30 The normal unit sales price per unit is $165. A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to fulfill the order, 3,000 units of regular sales would have to be foregone. -The opportunity cost associated with this order is

(Multiple Choice)

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Question 125

In the analysis concerning the acceptance or rejection of a special order, which items are relevant?

(Multiple Choice)

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Question 126

If a company anticipates that other sales will be affected by the acceptance of a special order, then

(Multiple Choice)

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Question 127

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

(Multiple Choice)

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Question 128

If an unprofitable segment is eliminated

(Multiple Choice)

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Question 129

In deciding on the future status of an unprofitable segment, management should recognize that net income could decrease by eliminating the unprofitable segment.

(True/False)

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Question 130

In incremental analysis,

(Multiple Choice)

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Question 131

Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?

(Multiple Choice)

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Question 132

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 -The additional profit that would result from processing rough lumber further is

(Multiple Choice)

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Question 133

Billings Company has the following costs when producing 100,000 units: Variable costs \ 600,000 Fixed costs 900,000 An outside supplier has offered to make the item at $4.50 a unit.If the decision is made to purchase the item outside, current production facilities could be leased to another company for $165,000.The net increase (decrease) in the net income of accepting the supplier's offer is

(Multiple Choice)

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Question 134

Tasty Bites produces corn chips.The cost of one batch is below: Direct materials \ 18 Direct labor 13 Variable overhead 11 Fixed overhead 14 An outside supplier has offered to produce the corn chips for $30 per batch.How much will Tasty Bites save if it accepts the offer?

(Multiple Choice)

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Question 135

The source of data to serve as inputs in incremental analysis is generated by

(Multiple Choice)

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Question 136

Use the following information for questions Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: Direct materials \ 55,000 Direct labor 160,000 Variable overhead 75,000 Fixed overhead 175,000 If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable. -What is the relevant cost per unit of part A12E?

(Multiple Choice)

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Question 137

If a company is operating at less than capacity, the incremental costs of a special order will likely include variable manufacturing costs, but not fixed costs.

(True/False)

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Question 138

Incremental analysis is synonymous with

(Multiple Choice)

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Question 139

Sala Co.is contemplating the replacement of an old machine with a new one.The following information has been gathered: Old Machine New Machine Price \ 300,000 \ 600,000 Accumulated Depreciation 90,000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs \ 240,000 \ 180,600 If the old machine is replaced, it can be sold for $24,000. The net advantage (disadvantage) of replacing the old machine is

(Multiple Choice)

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Question 140

A company is contemplating the acceptance of a special order.The order would not affect regular sales and could be filled without exceeding plant capacity.However, a new stamping machine would have to be purchased in order to stamp the customer's name on the product.Which of the following is likely?

In the analysis concerning the acceptance or rejection of a special order, which items are relevant?

If a company anticipates that other sales will be affected by the acceptance of a special order, then

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

If an unprofitable segment is eliminated

In deciding on the future status of an unprofitable segment, management should recognize that net income could decrease by eliminating the unprofitable segment.

In incremental analysis,

Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?

Tasty Bites produces corn chips.The cost of one batch is below: Direct materials \ 18 Direct labor 13 Variable overhead 11 Fixed overhead 14 An outside supplier has offered to produce the corn chips for $30 per batch.How much will Tasty Bites save if it accepts the offer?

The source of data to serve as inputs in incremental analysis is generated by

If a company is operating at less than capacity, the incremental costs of a special order will likely include variable manufacturing costs, but not fixed costs.

Incremental analysis is synonymous with

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

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