A) should be initially recorded as an asset. B) is the cost of a new product proposal. C) is the potential benefit that may be obtained by following an alternative course of action. D) is classified as manufacturing overhead. A) should be initially recorded as an asset. B) is the cost of a new product proposal. C) is the potential benefit that may be obtained by following an alternative course of action. D) is classified as manufacturing overhead.

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 $45000 which has been allocated based on the gallons of milk base used by each product.Results for July follow: $\begin{array} { l } & \text {Sour Cream }& \text { Ice Cream}& \text { Yogurt}& \text { Butter }& \text { Total}\\ \text {Units sold }&2,000&500&400&2,000&4,900\\ \text {revenue }&\$10,000&\$20,000&\$10,000&\$20,000&\$60,000\\ \text {Variable departmental costs }&6,000&13,000&4,200&4,800&28,000\\ \text {Fixed costs }&5,000&2,000&3,000&7,000&17,000\\ \text {Net income (loss) }&\$1,000&\$5,000&\$2,800&\$8,200&\$15,000\\ \end{array}$ How much are total joint costs of the products?

A) $28000 B) $17000 C) $45000 D) $15000 A) $28000 B) $17000 C) $45000 D) $15000

Marcus Company gathered the following data about the three products that it produces: \[\begin{array} { c c c c } \text { Present } & \begin{array} { c } \text { Estimated Additional } \\ \text { Product } \end{array} & \begin{array} { c } \text { Estimated Sales } \\ \text { Sales Value } \end{array} &\begin{array} { c } \text { Processing Costs } \\ \text { if Processed Further }\end{array} \\ \hline \text { A } & \$ 12,000 & \$ 8,000 & \$ 21,000 \\ \text { B } & 14,000 & 5,000 & 18,000 \\ \text { C } & 11,000 & 3,000 & 16,000 \end{array}\] Which of the products should not be processed further?

A) Product A B) Product B C) Product C D) Products A and C A) Product A B) Product B C) Product C D) Products A and C

Galley Industries can produce 100 units of a necessary component part with the following costs: \[\begin{array} { l r } \text { Direct Materials } & \$ 20,000 \\ \text { Direct Labor } & 9,000 \\ \text { Variable Overhead } & 21,000 \\ \text { Fixed Overhead } & 8,000 \end{array}\] If Galley Industries purchases the component externally $2000 of the fixed costs can be avoided.Below what external price for the 100 units would Galley choose to buy instead of make?

A) $50000 B) $56000 C) $44000 D) $52000 A) $50000 B) $56000 C) $44000 D) $52000

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

Exam 13: Budgetary Control and Responsibility Accounting

Billings Company has the following costs when producing 100000 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 $165000.The net increase (decrease) in the net income of accepting the supplier's offer is

(Multiple Choice)

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Question 41

Janssen Company has old inventory on hand that cost $24000.Its scrap value is $32000.The inventory could be sold for $80000 if manufactured further at an additional cost of $24000.What should Janssen do?

(Multiple Choice)

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Question 42

It costs Dryer Company $26 per unit ($18 variable and $8 fixed) to produce its product which normally sells for $38 per unit.A foreign wholesaler offers to purchase 5000 units at $21 each.Dryer would incur special shipping costs of $2 per unit if the order were accepted.Dryer has sufficient unused capacity to produce the 5000 units.If the special order is accepted what will be the effect on net income?

(Multiple Choice)

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Question 43

Which products should be processed further?

(Multiple Choice)

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Question 44

Which is the first step in the management decision-making process?

(Multiple Choice)

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Question 45

An opportunity cost

(Multiple Choice)

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Question 46

New Age 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.New Age Makeup could sell the sunscreen bottles for $23 each.

(Multiple Choice)

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Question 47

It is always better to sell now rather than process further because of the time value of money.

(True/False)

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Question 48

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 $45000 which has been allocated based on the gallons of milk base used by each product.Results for July follow: Sour Cream Ice Cream Yogurt Butter Total Units sold 2,000 500 400 2,000 4,900 revenue \1 0,000 \2 0,000 \1 0,000 \2 0,000 \6 0,000 Variable departmental costs 6,000 13,000 4,200 4,800 28,000 Fixed costs 5,000 2,000 3,000 7,000 17,000 Net income (loss) \1 ,000 \5 ,000 \2 ,800 \8 ,200 \1 5,000 How much are total joint costs of the products?

(Multiple Choice)

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Question 49

What is the net cost of the new equipment?

(Multiple Choice)

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Question 50

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

(Multiple Choice)

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Question 51

Galley Industries can produce 100 units of a necessary component part with the following costs: Direct Materials \ 20,000 Direct Labor 9,000 Variable Overhead 21,000 Fixed Overhead 8,000 If Galley Industries purchases the component externally $2000 of the fixed costs can be avoided.Below what external price for the 100 units would Galley choose to buy instead of make?

(Multiple Choice)

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Question 52

If a company is operating at full capacity the incremental costs of a special order will likely include fixed manufacturing costs.

(True/False)

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Question 53

In a retain or replace equipment decision trade-in allowance available on old equipment

(Multiple Choice)

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Question 54

A company contemplating the acceptance of a special order has the following unit cost behavior based on 10000 units: Direct materials \ 4 Direct labor 10 Variable overhead 8 Fixed overhead 6 A foreign company wants to purchase 2000 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 $4000 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 55

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

(Multiple Choice)

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Question 56

Internal reports that review the actual impact of decisions are prepared by

(Multiple Choice)

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Question 57

Moreland Clean Company spent $8000 to produce Product 89 which can be sold as is for $10000 or processed further incurring additional costs of $3000 and then be sold for $14000.Which amounts are relevant to the decision about Product 89?

(Multiple Choice)

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Question 58

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 59

If Clemente accepts the offer by how much will net income increase (decrease)?

(Multiple Choice)

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Question 60

Janssen Company has old inventory on hand that cost $24000.Its scrap value is $32000.The inventory could be sold for $80000 if manufactured further at an additional cost of $24000.What should Janssen do?

Which products should be processed further?

Which is the first step in the management decision-making process?

An opportunity cost

New Age 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.New Age Makeup could sell the sunscreen bottles for $23 each.

It is always better to sell now rather than process further because of the time value of money.

What is the net cost of the new equipment?

If a company is operating at full capacity the incremental costs of a special order will likely include fixed manufacturing costs.

In a retain or replace equipment decision trade-in allowance available on old equipment

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

Internal reports that review the actual impact of decisions are prepared by

Moreland Clean Company spent $8000 to produce Product 89 which can be sold as is for $10000 or processed further incurring additional costs of $3000 and then be sold for $14000.Which amounts are relevant to the decision about Product 89?

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?

If Clemente accepts the offer by how much will net income increase (decrease)?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities and Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Activity Based Costing

Cost-Volume Profit Analysis: Additional Issues

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