Exam 7: Incremental Analysis

During 2015, it cost Westa, Inc.$12 per unit to produce Part T5.During 2016, it has increased to $14 per unit.In 2016, Southside Company has offered to provide Part T5 for $9 per unit to Westa.As it pertains to the make or buy decision, which statement is true?

The main purpose of allocating joint costs to products is to

PH Toy Company is unsure of whether to sell its product assembled or unassembled.The unit cost of the unassembled product is $30 and PH Toy Company would sell it for $65.The cost to assemble the product is estimated at $21 per unit and PH Toy Company believes the market would support a price of $85 on the assembled unit.What decision should PH Toy make?

Market Makeup produces face cream.Each bottle of face cream costs $10 to produce and can be sold for $13.The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each.Market Makeup could sell the sunscreen bottles for $23 each.

The cost to produce Part A was $5 per unit in 2015.During 2016, it has increased to $8 per unit.In 2016, Supplier Company has offered to supply Part A for $6 per unit.For the make-or-buy decision,

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

Argus Company anticipates that other sales will be affected by the acceptance of a special order.What should the company do?

Truckel, Inc.currently manufactures a wicket as its main product.The costs per unit are as follows: Direct materials and direct labour \ 11.00 Variable overhead 3.00 Fixed overhead \ 2.00 Total \ 22.00 The fixed overhead is an allocated common cost.How much is the relevant cost of the wicket?

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

Which of the following describes one aspect of incremental analysis?

For which of the following is incremental analysis appropriate?

Max Company has excess capacity.A customer proposes to buy 400 widgets at a special unit price even though the price is less than the unit variable cost to manufacture the item.Max should accept the special order if demand on other products is unaffected.

For which of the following decisions is incremental analysis NOT appropriate?

Shorebuck's Coffee can sell all the units it can produce of either latte or cappuccino but not both.Latte has a unit contribution margin of $45 and takes three machine hours to make and cappuccino has a unit contribution margin of $32 and takes two machine hours to make.There are 1,300 machine hours available to manufacture a product.What should Shorebuck's do?

Seville Company manufactures a product with a unit variable cost of $42 and a unit sales price of $75.Fixed manufacturing costs were $80,000 when 10,000 units were produced and sold, equating to $8 per unit.The company has a one-time opportunity to sell an additional 1,500 units at $55 each in an international market which would not affect its present sales.The company has sufficient capacity to produce the additional units.How much is the relevant income effect of accepting the special order?

Coggin Company gathered the following data about the three products that it produces: Estimated Sales Present Value before Additional Estimated Sales Product Processing Processing Costs if Processed Further \ 9,000 \ 6,000 \ 16,000 15,000 5,000 18,000 11,000 8,000 16,000 Which of the products should be processed further?

Seran Company has contacted Truckel Inc.with an offer to sell it 5,000 of the wickets for $18.00 each.If Truckel makes the wickets, variable costs are $11 per unit.Fixed costs are $12 per unit however $5 per unit is avoidable.Should Truckel make or buy the wickets? What are the savings of this choice?

Which of the following is a true statement about costs in incremental analysis?

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

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?