Question 11Which of the following costs are always irrelevant to all decisions?a.Salvage value of an old machineb.Variab...
Get help with any kind of assignment - from a high school essay to a PhD dissertation
Question 11
Which of the following costs are always irrelevant to all decisions?
a.
Salvage value of an old machine
b.
Variable production costs
c.
Fixed costs such as factory rent and insurance
d.
Selling costs
e.
None of the above
Question 12
The Brice Co. produces and sells two types of products, standard and premium, using the same manufacturing inputs.
Demand for either product is high, but the company has only 1200 pounds of raw materials available. Details about
revenues and costs from the prior year are in the table below. Fixed overhead was $6,000 last year and was applied at a
rate of $6 per direct labor hour.
Assuming cost behavior will be the same next year, which product or products should the company make to maximize
profits?
a.
Produce some standard and some premiums
b.
Produce only premiums
c.
Produce only standards
d.
Do not produce either product
Continued on next pageâ¦â¦â¦.
Question 13
The Dozier Co. sells 3-point hitches (a tractor part) for $100 each. Variable production costs are $75 per unit. Last year,
the company sold 240 hitches and had a profit of $3,200. If revenue per unit and cost behavior remains the same next
year, what is Dozier's breakeven point for next year?
a.
240
b.
128
c.
112
d.
None of the above
Question 14
Dozier is considering spending an additional $1,300 on advertising next year. Dozier expects this to increase units sold
by 50. Assuming the cost behavior remains constant, how would Dozier's profit change with the additional investment
in advertising?
Question 15
January 2, 2015, finds Mr Carrera re-examining how his company acquires telephone service. The most recent budget
shows an expected cost of $600 per quarter for the next three years, or a total of $7,200. The $600 is paid at the end of
each quarter. Mr. Carrera received an offer from a new phone company in late December that he could pay $6,500 on
January 3, 2015 instead of making the quarterly payments for 3 years. Mr. Carrera has asked you to do a quantitative
analysis of this proposal - does this really save the company money? When you ask, Carrera says the company's
discount rate is 2% per quarter. ("ish" means your answer is within $5 of the figure given)
a.
The company saves $855 (ish) by paying immediately
b.
The company saves $728 (ish) by paying immediately
c.
The company saves $700 by paying immediately
d.
The company loses $155 (ish) by paying immediately
e.
None of the above
Continued on next pageâ¦â¦â¦
Question 16
Without prejudice to your answer above, suppose the quantitative analysis revealed the company could save money by
paying upfront instead of quarterly. Identify two distinct qualitative issues that Mr. Carrera should consider before
accepting this offer
Question 17
Thornwell Co. uses a job-order cost system. It builds batches of furniture and then sells the finished products to
retailers. It had no inventories at the beginning of 2015. During 2015, it started three batches Sofas, Tables, and Desks.
Information about each job is in the chart below. Thornwell applies overhead to jobs at a rate of $30 per direct labor
hour, with two-thirds of the overhead costs being fixed and one-third variable. The batches of Sofas and Tables were
completed and all of those items were shipped to customers in 2015. The batch of Desks remains in process at the end
of 2015. Actual overhead costs totaled $20,000. Thornwell closes over/under applied overhead to cost of goods sold at
the end of each year.
What is Thornwell's balance in inventories at the end of 2015?
a.
$41,790
b.
$3,740
c.
$4,440
d.
$5,840
e.
$4,340
f.
None of the above
Question 18
On January 1, 2016, Thornwell decides to suspend operations, which means the batch of Desks will never be completed.
The P.J. Company approaches Thornwell with an offer to buy the partially completed Desks. Thornwell would need to
spend $960 to crate the partially completed Desks in preparation for shipping to P.J. What is minimum payment that
Thornwell needs to receive from P.J. in order to cover all its relevant costs?
Continued on next pageâ¦â¦â¦
Question 19
The Cliney Co. is considering investing $40,000 in new equipment. If the project is accepted, it would generate cash
revenues of $15,000 per year and cash costs of $5,000 per year for the next 10 years. The equipment is expected to be
sold for $8,000 at the end of year 10. Assume Cliney uses straight-line depreciation to compute depreciation expense for
all purposes.
What is the net cash inflow in year 5? Assume Cliney has a 0.0% tax rate (is tax exempt)
a.
$6,800
b.
$8,000
c.
$10,000
d.
$15,000
e.
None of the above
Question 20
Use the information from Cliney Co. in the prior problem, but assume Cliney has a 35% tax rate.
What is the net cash inflow in year 10?
Which of the following costs are always irrelevant to all decisions?
a.
Salvage value of an old machine
b.
Variable production costs
c.
Fixed costs such as factory rent and insurance
d.
Selling costs
e.
None of the above
Question 12
The Brice Co. produces and sells two types of products, standard and premium, using the same manufacturing inputs.
Demand for either product is high, but the company has only 1200 pounds of raw materials available. Details about
revenues and costs from the prior year are in the table below. Fixed overhead was $6,000 last year and was applied at a
rate of $6 per direct labor hour.
Assuming cost behavior will be the same next year, which product or products should the company make to maximize
profits?
a.
Produce some standard and some premiums
b.
Produce only premiums
c.
Produce only standards
d.
Do not produce either product
Continued on next pageâ¦â¦â¦.
Question 13
The Dozier Co. sells 3-point hitches (a tractor part) for $100 each. Variable production costs are $75 per unit. Last year,
the company sold 240 hitches and had a profit of $3,200. If revenue per unit and cost behavior remains the same next
year, what is Dozier's breakeven point for next year?
a.
240
b.
128
c.
112
d.
None of the above
Question 14
Dozier is considering spending an additional $1,300 on advertising next year. Dozier expects this to increase units sold
by 50. Assuming the cost behavior remains constant, how would Dozier's profit change with the additional investment
in advertising?
Question 15
January 2, 2015, finds Mr Carrera re-examining how his company acquires telephone service. The most recent budget
shows an expected cost of $600 per quarter for the next three years, or a total of $7,200. The $600 is paid at the end of
each quarter. Mr. Carrera received an offer from a new phone company in late December that he could pay $6,500 on
January 3, 2015 instead of making the quarterly payments for 3 years. Mr. Carrera has asked you to do a quantitative
analysis of this proposal - does this really save the company money? When you ask, Carrera says the company's
discount rate is 2% per quarter. ("ish" means your answer is within $5 of the figure given)
a.
The company saves $855 (ish) by paying immediately
b.
The company saves $728 (ish) by paying immediately
c.
The company saves $700 by paying immediately
d.
The company loses $155 (ish) by paying immediately
e.
None of the above
Continued on next pageâ¦â¦â¦
Question 16
Without prejudice to your answer above, suppose the quantitative analysis revealed the company could save money by
paying upfront instead of quarterly. Identify two distinct qualitative issues that Mr. Carrera should consider before
accepting this offer
Question 17
Thornwell Co. uses a job-order cost system. It builds batches of furniture and then sells the finished products to
retailers. It had no inventories at the beginning of 2015. During 2015, it started three batches Sofas, Tables, and Desks.
Information about each job is in the chart below. Thornwell applies overhead to jobs at a rate of $30 per direct labor
hour, with two-thirds of the overhead costs being fixed and one-third variable. The batches of Sofas and Tables were
completed and all of those items were shipped to customers in 2015. The batch of Desks remains in process at the end
of 2015. Actual overhead costs totaled $20,000. Thornwell closes over/under applied overhead to cost of goods sold at
the end of each year.
What is Thornwell's balance in inventories at the end of 2015?
a.
$41,790
b.
$3,740
c.
$4,440
d.
$5,840
e.
$4,340
f.
None of the above
Question 18
On January 1, 2016, Thornwell decides to suspend operations, which means the batch of Desks will never be completed.
The P.J. Company approaches Thornwell with an offer to buy the partially completed Desks. Thornwell would need to
spend $960 to crate the partially completed Desks in preparation for shipping to P.J. What is minimum payment that
Thornwell needs to receive from P.J. in order to cover all its relevant costs?
Continued on next pageâ¦â¦â¦
Question 19
The Cliney Co. is considering investing $40,000 in new equipment. If the project is accepted, it would generate cash
revenues of $15,000 per year and cash costs of $5,000 per year for the next 10 years. The equipment is expected to be
sold for $8,000 at the end of year 10. Assume Cliney uses straight-line depreciation to compute depreciation expense for
all purposes.
What is the net cash inflow in year 5? Assume Cliney has a 0.0% tax rate (is tax exempt)
a.
$6,800
b.
$8,000
c.
$10,000
d.
$15,000
e.
None of the above
Question 20
Use the information from Cliney Co. in the prior problem, but assume Cliney has a 35% tax rate.
What is the net cash inflow in year 10?
