Deck 14: Decision Making: Relevant Costs and Benefits

Question 1

The managerial accountant's primary role in the decision-making process is to decide what information is relevant to the problem and provide timely and accurate data.

Answer 1

True

Question 2

The process of identifying relevant costs and benefits is largely the same whether the decision is viewed from a short-run or long-run perspective.

Answer 2

True

Question 3

In most all decisions, joint costs are relevant costs.

Answer 3

False

Question 4

The first step in the decision-making process is to identify the alternatives.

Question 5

Cost predictions relevant to repetitive decisions typically can draw on a large amount of historical data.

Question 6

The axes and constraints form an area for the solution to a linear program called the relevant region.

Question 7

A firm that decides to emphasize those goods with the highest contribution margin per unit may have made an incorrect decision when the company has capacity constraints in the form of limited resources.

Question 8

Under activity-based costing, the concepts underlying relevant-costing analysis are not valid because they may derive conclusions that are different than those obtained with conventional cost analyses.

Question 9

An accounting information system should be designed to provide information that is useful. To be useful the information must be:

A) qualitative rather than quantitative.
B) unique and unavailable through other sources.
C) historical in nature and not purport to predict the future.
D) marginal between two alternatives.
E) relevant, accurate, and timely.

Question 10

The last step in the decision-making process is to collect the data.

Question 11

The City of Columbus should not consider the purchase price of its old vehicle when making the decision to replace it with a more cost effective new vehicle.

Question 12

Managerial accountants:

A) rarely become involved in an organization's decision-making activities.
B) make decisions that focus solely on an organization's accounting matters.
C) collect data and provide information so that decisions can be made.
D) often serve as a cross-functional team member, making a wide range of decisions.
E) collect data and provide information so that decisions can be made and often serve as a cross-functional team member, making a wide range of decisions.

Question 13

Dubin Company is operating at capacity and wants to add a new service to its expanding business. The new service should be added as long as service revenues exceed the sum of variable costs and fixed costs.

Question 14

At which step or steps in the decision-making process do qualitative considerations generally have the greatest impact?

A) Specifying the criterion and identifying the alternatives.
B) Developing a decision model.
C) Collecting the data.
D) Making a decision.
E) Identifying the alternatives.

Question 15

In the final analysis of a decision, quantitative measures are more important than qualitative measures.

Question 16

The term "opportunity cost" is best defined as the benefit associated with a rejected alternative when making a choice.

Question 17

Opportunity cost is not important in special order decisions.

Question 18

The concept of a relevant cost can be defined as a past cost that differs among alternatives.

Question 19

Factors in a decision problem that cannot be expressed in numerical terms are:

A) qualitative in nature.
B) quantitative in nature.
C) predictive in nature.
D) sensitive in nature.
E) uncertain in nature.

Question 20

Linear programming is used for writing code, but not for product mix problems.

Question 21

The book value of equipment currently owned by a company is an example of a (n):

A) future cost.
B) differential cost.
C) comparative cost.
D) opportunity cost.
E) sunk cost.

Question 22

To be useful in decision making, information should possess which of the following characteristics?

Question 23

Two months ago, Air-tite Corporation purchased 4,500 pounds of Hydrol, paying $15,300. The demand for this product has been very strong since the acquisition, with the market price jumping to $4.05 per pound. (Air-tite can buy or sell Hydrol at this price.) The company recently received a special-order inquiry, one that would require the use of 4,200 pounds of Hydrol. Which of the following is (are) relevant in deciding whether to accept the special order?

A) The 300-pound remaining inventory of Hydrol.
B) The $4.05 market price.
C) The $3.40 purchase price.
D) 4,500 pounds of Hydrol.
E) Two or more of the other factors are relevant.

Question 24

Consider the following costs and decision-making situations:
I) The cost of existing inventory, in a keep vs. disposal decision.
II) The cost of special electrical wiring, in an equipment acquisition decision.
III) The salary of a supervisor who will be transferred elsewhere in the organization, in a department-closure decision.
Which of the above costs is (are) relevant to the decision situation noted?

A) I only.
B) II only.
C) III only.
D) I and II.
E) II and III.

Question 25

A special order generally should be accepted if:

A) its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order.
B) excess capacity exists and the revenue exceeds all variable costs associated with the order.
C) excess capacity exists and the revenue exceeds allocated fixed costs.
D) the revenue exceeds total costs, regardless of available capacity.
E) the revenue exceeds variable costs, regardless of available capacity.

Question 26

In early July, Damon Rutton purchased a $70 ticket to the December 15 game of the Sarasota Shippers. Parking for the game was expected to cost approximately $22, and Rutton would probably spend another $15 for a souvenir program and food. It is now December 14. The Shippers were having a miserable season and the temperature was expected to peak at 5 degrees on game day. Damon is thinking about skipping the game and taking his wife to the movies and dinner, at a cost of $50. The amount of sunk cost that should influence Damon's decision to spend some time with his wife is:

A) $0.
B) $20.
C) $50.
D) $70.
E) None of the answers is correct.

Question 27

Allison is contemplating a job offer with an advertising agency where she will make $54,000 in her first year of employment. Alternatively, Allison can begin to work in her father's business where she will earn an annual salary of $38,000. If Allison decides to work with her father, the opportunity cost would be:

A) $0.
B) $38,000.
C) $54,000.
D) $92,000.
E) irrelevant in deciding which job offer to accept.

Question 28

The following costs are relevant to the decision situation cited except:

A) the cost of hiring a full-time staff attorney, in a decision to establish an in-house legal department or retain the services of a prominent law firm.
B) the remodeling cost of existing office space, in a firm's decision to stay at its current location or move to a new building.
C) the long-term salary costs demanded by Joe Torrez (a superstar) and Rip Moran (an average player) in baseball contract negotiations, in a decision that determines the amounts by which ticket prices must be raised.
D) the cost to enhance an airline's Web site, in a decision to expand existing service to either Salt Lake City or Phoenix.
E) the commissions that could be earned by a salesperson, in a decision that involves salesperson compensation methods (i.e., commissions or flat monthly salaries).

Question 29

The cost of inventory currently owned by a company is an example of a (n):

A) opportunity cost.
B) sunk cost.
C) relevant cost.
D) differential cost.
E) future cost.

Question 30

A factory that makes a part has significant idle capacity. The factory's opportunity cost of making this part is equal to:

A) the variable manufacturing cost per unit.
B) the fixed manufacturing cost per unit.
C) the semivariable cost per unit.
D) the total manufacturing cost per unit.
E) zero.

Question 31

An opportunity cost may be described as:

A) a forgone benefit.
B) a historical cost.
C) a specialized type of variable cost.
D) a specialized type of fixed cost.
E) a specialized type of semivariable cost.

Question 32

A trade-off in a decision situation sometimes occurs between information:

A) accuracy and relevance.
B) relevance and uniqueness.
C) accuracy and timeliness.
D) sensitivity and accuracy.
E) sensitivity and relevance.

Question 33

Which of the following best defines the concept of a relevant cost?

A) A past cost that is the same among alternatives.
B) A past cost that differs among alternatives.
C) A future cost that is the same among alternatives.
D) A future cost that differs among alternatives.
E) A cost that is based on past experience.

Question 34

Cornerstone, Inc. has $125,000 of inventory that suffered minor smoke damage from a fire in the warehouse. The company can sell the goods "as is" for $45,000; alternatively, the goods can be cleaned and shipped to the firm's outlet center at a cost of $23,000. There the goods could be sold for $80,000. What alternative is more desirable and what is the relevant cost for that alternative?

A) Sell "as is," $125,000.
B) Clean and ship to outlet center, $23,000.
C) Clean and ship to outlet center, $103,000.
D) Clean and ship to outlet center, $148,000.
E) Neither alternative is desirable, as both produce a loss for the firm.

Question 35

The City of San Diego is about to replace an old fire truck with a new vehicle in an effort to save maintenance and other operating costs. Which of the following items, all related to the transaction, would not be considered in the decision?

A) Purchase price of the new vehicle.
B) Purchase price of the old vehicle.
C) Savings in operating costs as a result of the new vehicle.
D) Proceeds from disposal of the old vehicle.
E) Future depreciation on the new vehicle.

Question 36

Which of the following costs can be ignored when making a decision?

A) Opportunity costs.
B) Differential costs.
C) Sunk costs.
D) Relevant costs.
E) All future costs.

Question 37

Which of the following costs should be used when choosing between two decision alternatives?

Question 38

In early July, Colin Marks purchased a $70 ticket to the December 15 game of the Sarasota Shippers. Parking for the game was expected to cost approximately $22, and Marks would probably spend another $15 for a souvenir program and food. It is now December 14. The Shippers were having a miserable season and the temperature was expected to peak at 5 degrees on game day. Marks therefore decided to skip the game and took his wife to the movies, with tickets and dinner costing $50. The sunk cost associated with this decision situation is:

A) $20.
B) $50.
C) $70.
D) $107.
E) None of the answers is correct.

Question 39

McAlister Company is operating at capacity and desires to add a new service to its rapidly expanding business. The service should be added as long as service revenues exceed:

A) variable costs.
B) fixed costs.
C) the sum of variable costs and fixed costs.
D) the sum of variable costs and any related opportunity costs.
E) the sum of variable costs, fixed costs, and any related opportunity costs.

Question 40

The term "opportunity cost" is best defined as:

A) the amount of money paid for an item.
B) the amount of money paid for an item, taking inflation into account.
C) the amount of money paid for an item, taking possible discounts into account.
D) the benefit associated with a rejected alternative when making a choice.
E) an irrelevant decision factor.

Question 41

Fairline Skyways has a significant presence at the Charlotte International Airport and therefore operates the Diamond Club, which is across from gate 36 in terminal 1. The Diamond Club provides food and business services for the company's frequent flyers. Consider the following selected costs of Club operation:
1) Receptionist and supervisory salaries
2) Catering
3) Terminal depreciation (based on square footage)
4) Airport fees (computed as a percentage of club revenue)
5) Allocated Fairline administrative overhead
Management is exploring whether to close the club and expand the seating area for gate 36.
Which of the preceding expenses would the airline classify as unavoidable?

A) 3.
B) 4.
C) 5.
D) 3, 5.
E) None of the answers is correct.

Question 42

Forrest Corporation manufactures parts that are used in the production of washers and dryers. The following costs are associated with part no. 65:

The company received a special-order inquiry from an appliance manufacturer in Brazil for 15,000 units of part no. 65. Only $3 of fixed manufacturing will be incurred on the order, and the variable selling costs per unit will amount to only $5. Since Forrest has excess capacity, the minimum price that Forrest should charge the Brazil manufacturer is:

A) $96.
B) $99.
C) $105.
D) $108.
E) None of the answers is correct.

Question 43

Flavor Enterprises has been approached about providing a new service to its clients. The company will bill clients $140 per hour; the related hourly variable and fixed operating costs will be $75 and $18, respectively. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:

A) $0.
B) $47.
C) $65.
D) $93.
E) $140.

Question 44

Deltones, a manufacturer of computer peripherals, has excess capacity. The company's Alabama plant has the following per-unit cost structure for item no. 89:

The traceable fixed administrative cost was incurred at the Alabama plant; in contrast, the allocated administrative cost represents a "fair share" of Deltones' corporate overhead. Alabama has been presented with a special order of 5,000 units of item no. 89 on which no selling cost will be incurred. The proper relevant cost in deciding whether to accept this special order would be:

A) $40.
B) $59.
C) $61.
D) $80.
E) None of the answers is correct.

Question 45

When deciding whether to sell a product at the split-off point or process it further, joint costs are not usually relevant because:

A) such amounts do not help to increase sales revenue.
B) such amounts only slightly increase a company's sales margin.
C) such amounts are sunk and do not change with the decision.
D) the sales revenue does not decrease to the extent that it should, if compared with separable processing.
E) such amounts reflect opportunity costs.

Question 46

Which of the following statements regarding costs and decision making is correct?

A) Fixed costs must be considered only on a per-unit basis.
B) Per-unit fixed cost amounts are valid only for make-or-buy decisions.
C) Per-unit fixed costs can be misleading because such amounts appear to behave as variable costs when, in actuality, the amounts are related to fixed expenditures.
D) Sunk costs can be misleading in make-or-buy decisions because these amounts appear to be relevant differential costs.
E) Opportunity costs should be ignored when evaluating decision alternatives.

Question 47

Canyon Trails is studying whether to outsource its Human Resources (H/R) activities. Salaried professionals who earn $390,000 would be terminated; in contrast, administrative assistants who earn $120,000 would be transferred elsewhere in the organization. Miscellaneous departmental overhead (e.g., supplies, copy charges, overnight delivery) is expected to decrease by $30,000, and $25,000 of corporate overhead, previously allocated to Human Resources, would be picked up by other departments. If Canyon Trails can secure needed H/R services locally for $410,000, how much would the company benefit by outsourcing?

A) $10,000.
B) $35,000.
C) $130,000.
D) $155,000.
E) Nothing, as it would be cheaper to keep the department open.

Question 48

Elkhart, a division of Indiana Enterprises, currently makes 100,000 units of a product that has created a number of manufacturing problems. Elkhart's costs follow.

If Elkhart were to discontinue production, fixed manufacturing costs would be reduced by 70%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is:

A) $540,000.
B) $594,000.
C) $666,000.
D) $720,000.
E) $726,000.

Question 49

Product costs incurred after the split-off point in a joint processing environment are called:

A) separable processing costs.
B) joint product costs.
C) non-relevant costs.
D) scrap costs.
E) spoilage costs.

Question 50

Use the following information to answer the following Questions
Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.

Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $20 per unit for Super. Variable selling expenses are $4 per unit for Regular and $20 per unit for Super; remaining selling amounts are fixed.


-Disregard the information in the previous question. If Omar Industries eliminates Regular and uses the available capacity to produce and sell an additional 1,500 units of Super, what would be the impact on operating income?

A) $28,000 increase
B) $45,000 increase
C) $55,000 increase
D) $85,000 increase
E) None of the answers is correct.

Question 51

Haverton Industries is studying whether to drop a product because of ongoing losses. Costs that would be relevant in this situation would include variable manufacturing costs as well as:

A) factory depreciation.
B) avoidable fixed costs.
C) unavoidable fixed costs.
D) allocated corporate administrative costs.
E) general corporate advertising.

Question 52

An architecture firm currently offers services that appeal to both individuals and commercial clients. If the firm decides to discontinue services to individuals because of ongoing losses, which of the following costs could the company likely avoid?

A) General corporate overhead that was allocated to individual clients.
B) Building depreciation.
C) Insurance.
D) Variable operating costs.
E) Monthly installment payments on general-purpose, computer drafting equipment.

Question 53

Boise, a division of Price Enterprises, currently performs computer services for various departments of the firm. One of the services has created a number of operating problems, and management is exploring whether to outsource the service to a consultant. Traceable variable and fixed operating costs total $80,000 and $25,000, respectively, in addition to $18,000 of corporate administrative overhead allocated from Price. If Boise were to use the outside consultant, fixed operating costs would be reduced by 70%. The irrelevant costs in Boise's outsourcing decision total:

A) $17,500.
B) $18,000.
C) $25,000.
D) $25,500.
E) None of the answers is correct.

Question 54

San Ruiz Interiors provides design services to residential and commercial clients. The residential services produce a contribution margin of $450,000 and have traceable fixed operating costs of $480,000. Management is studying whether to drop the residential operation. If closed, the fixed operating costs will fall by $370,000 and San Ruiz' income will:

A) increase by $30,000.
B) increase by $80,000.
C) increase by $340,000.
D) decrease by $80,000.
E) decrease by $340,000.

Question 55

The Boot Department at the Omaha Department Store is being considered for closure. The following information relates to boot activity:

If 70% of the fixed operating costs are avoidable, should the Boot Department be closed?

A) Yes, Omaha would be better off by $23,000.
B) Yes, Omaha would be better off by $50,000.
C) No, Omaha would be worse off by $13,000.
D) No, Omaha would be worse off by $40,000.
E) None of the answers is correct.

Question 56

Use the following information to answer the following Questions
Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.

Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $20 per unit for Super. Variable selling expenses are $4 per unit for Regular and $20 per unit for Super; remaining selling amounts are fixed.


-Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued?

A) $0.
B) $10,400 increase.
C) $20,000 increase.
D) $39,600 decrease.
E) None of the answers is correct.

Question 57

Carlton Corporation is composed of five divisions. Each division is allocated a share of Carlton's overhead to make divisional managers aware of the cost of running the corporate headquarters. The following information relates to the Metro Division:

If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated. What will be the impact on Carlton's overall profitability if the Metro Division is closed?

A) Decrease by $200,000.
B) Decrease by $500,000.
C) Decrease by $2,100,000.
D) Decrease by $2,400,000.
E) None of the answers is correct.

Question 58

Elkhorn, Inc., which has excess capacity, received a special order for 4,000 units at a price of $15 per unit. Currently, production and sales are anticipated to be 10,000 units without considering the special order. Budget information for the current year follows.

Cost of goods sold includes $30,000 of fixed manufacturing cost. If the special order is accepted, the company's income will:

A) increase by $2,000.
B) decrease by $2,000.
C) increase by $14,000.
D) decrease by $14,000.
E) None of the answers is correct.

Question 59

The term "outsourcing" is most closely associated with:

A) special-order decisions.
B) make-or-buy decisions.
C) equipment replacement decisions.
D) decisions to process joint products beyond the split-off point.
E) decisions that involve limited resources.

Question 60

Brilliant, Inc. reported the following results from the sale of 24,000 units of IT-54:

Extra Company has offered to purchase 3,000 IT-54s at $16 each. Brilliant has available capacity, and the president is in favor of accepting the order. She feels it would be profitable because no variable selling costs will be incurred. The plant manager is opposed because the "full cost" of production is $17. Which of the following correctly notes the change in income if the special order is accepted?

A) $3,000 decrease.
B) $3,000 increase.
C) $12,000 decrease.
D) $12,000 increase.
E) None of the answers is correct.

Question 61

Use this information to answer the following Questions
Kingston Manufacturing has 27,000 labor hours available for producing X and Y. Consider the following information:



-If Kingston follows proper managerial accounting practices, how many units of Product Y should it produce?

A) 8,000.
B) 4,500.
C) 6,000.
D) 5,000.
E) 1,500.

Question 62

Which of the following characteristics would best explain the use of probabilities and expected values in a decision analysis?

A) Limited resources.
B) Uncertainty.
C) Inflation.
D) Multiple products and services.
E) Production bottlenecks.

Question 63

Product costs incurred before the split-off point in a joint processing environment are called:

A) separable processing costs.
B) joint product costs.
C) non-relevant costs.
D) scrap costs.
E) spoilage costs.

Question 64

Use this information to answer the following Questions
Kingston Manufacturing has 27,000 labor hours available for producing X and Y. Consider the following information:



-If Kingston follows proper managerial accounting practices, how many units of Product X should it produce?

A) 5,000.
B) 1,500.
C) 8,000.
D) 4,500.
E) 6,000.

Question 65

Homer Enterprises, which produces various goods, has limited processing hours at its manufacturing plant. The following data apply to product no. 607:
Sales price per unit: $9.60
Variable cost per unit: $6.20
Process time per unit: 4 hours
Management is now studying whether to devote the firm's limited hours to product no. 607 or to other products. What key dollar amount should management focus on when determining no. 607's "value" to the firm and deciding the best course of action to follow?

A) $0.85.
B) $2.40.
C) $3.40.
D) $6.20.
E) $9.60.

Question 66

When using a graphical solution to a linear programming problem, the optimal solution will lie in an area commonly known as the:

A) region of maximization.
B) feasible region.
C) objective region.
D) constraint region.
E) curvilinear region.

Question 67

Phillippe manufactures A and B from a joint process (cost = $80,000). Ten thousand pounds of B can be sold at split-off for $15 per pound or processed further at an additional cost of $20,000 and later sold for $16. If Phillippe decides to process B beyond the split-off point, operating income will:

A) increase by $10,000.
B) increase by $20,000.
C) decrease by $10,000.
D) decrease by $20,000.
E) decrease by $58,000.

Question 68

A company that is operating at full capacity should emphasize those products and services that have the:

A) lowest total per-unit costs.
B) highest contribution margin per unit.
C) highest contribution margin per unit of scarce resource.
D) highest operating income.
E) highest sales volume.

Question 69

A firm that decides to emphasize those goods with the highest contribution margin per unit may have made an incorrect decision when the company:

A) is highly automated.
B) has excess capacity.
C) has capacity constraints in the form of limited resources.
D) has a high fixed-cost structure.
E) has a high level of sunk costs.

Question 70

Newton Manufacturing has 31,000 labor hours available for producing M and N. Consider the following information:

If Newton follows proper managerial accounting practices in terms of setting a production schedule, how much contribution margin would the company expect to generate?

A) $31,450.
B) $63,100.
C) $66,700.
D) $78,100.
E) None of the answers is correct.

Question 71

Kranston Company is considering whether to sell Retox at the split-off point or subject it to further processing and produce a more refined product known as Retox-F. Consider the following items:
I) The selling price of Retox-F
II) The joint processing cost of Retox.
III) The separable cost of producing Retox-F.
Which of the above items is (are) relevant to Kranston's decision to process Retox into Retox-F?

A) I only.
B) II only.
C) III only.
D) I and II.
E) I and III.

Question 72

Consider the following statements about relevant costing and activity-based costing:
I) The concept of relevant costs and benefits cannot be used in conjunction with an activity-based costing system.
II) The concept of relevant costs and benefits must be modified for use with an activity-based costing system.
III) Generally speaking, the decision maker can better associate relevant costs with the activities that drive them under an activity-based costing system than under a conventional product-costing system.
Which of the above statements is (are) true?

A) I only.
B) II only.
C) III only.
D) I and II.
E) II and III.

Question 73

Use the following information to answer the following Questions

Jayleen Company makes two products: Carpet Kleen and Floor Deodorizer. Operating information from the previous year follows.

Fixed costs of $20,000 per year are presently allocated equally between both products. If the product mix were to change, total fixed costs would remain the same.


-The contribution margin per machine hour for Floor Deodorizer is:

A) $0.25.
B) $2.00.
C) $4.00.
D) $5.00.
E) $20.00.

Question 74

A technique that is useful in exploring what would happen if a key decision prediction or assumption proved wrong is termed:

A) sensitivity analysis.
B) uncertainty analysis.
C) project analysis.
D) linear programming.
E) the theory of constraints.

Question 75

Linear programming would be used by decision makers when there are:

A) limited resources for labor.
B) scarce resources for machine hours.
C) scarce resources for both labor and machine hours.
D) multiple scarce resources.
E) limited resources for material.

Question 76

Use the following information to answer the following Questions
Cheyenne Enterprises manufactures Nuts and Bolts from a joint process (cost = $80,000). Five thousand pounds of Nuts can be sold at split-off for $20 per pound; ten thousand pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes Cheyenne allocates joint costs using the relative sales value method.

-The amount of joint cost allocated to Bolts would be:

A) $32,000.
B) $40,000.
C) $48,000.
D) $60,000.
E) $80,000.

Question 77

Use the following information to answer the following Questions
Cheyenne Enterprises manufactures Nuts and Bolts from a joint process (cost = $80,000). Five thousand pounds of Nuts can be sold at split-off for $20 per pound; ten thousand pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes Cheyenne allocates joint costs using the relative sales value method.

-The amount of joint cost allocated to Nuts would be:

A) $32,000.
B) $40,000.
C) $48,000.
D) $60,000.
E) $80,000.

Question 78

A constraint function in a linear-programming problem might focus on:

A) sales dollars.
B) labor hours.
C) variable costs.
D) fixed costs.
E) qualitative factors.

Question 79

Phillippe Inc. manufactures A and B from a joint process (cost = $80,000). Five thousand pounds of A can be sold at split-off for $20 per pound or processed further at an additional cost of $20,000 and then sold for $25 per pound. If Phillippe decides to process A beyond the split-off point, operating income will:

A) increase by $10,000.
B) increase by $20,000.
C) decrease by $10,000.
D) decrease by $20,000.
E) increase by $5,000.

Question 80

Use the following information to answer the following Questions
Cheyenne Enterprises manufactures Nuts and Bolts from a joint process (cost = $80,000). Five thousand pounds of Nuts can be sold at split-off for $20 per pound; ten thousand pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes Cheyenne allocates joint costs using the relative sales value method.

-The amount of joint cost allocated to Nuts and Bolts, respectively, would be:

A) $32,000 and $40,000.
B) $32,000 and $48,000.
C) $48,000 and $32,000.
D) $40,000 and $32,000.
E) $40,000 and $40,000.