Exam 13: Budgetary Control and Responsibility Accounting

Abel Company produces three versions of baseball bats: wood aluminum and hard rubber.A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales \5 00,000 \2 00,000 \6 5,000 \7 65,000 Variable expenses 325,000 140,000 58,000 523,000 Contribution margin 175,000 60,000 7,000 242,000 Fixed expenses 75,000 35,000 22,000 132,000 Net income (loss) 100,000 \2 5,000 \1 5,000 \1 10,000 Assume none of the fixed expenses for the hard rubber line are avoidable.What will be total net income if the line is dropped?

Which of the following is not relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

NF Toy Company is unsure of whether to sell its product assembled or unassembled.The unit cost of the unassembled product is $24 and NF Toy would sell it for $52.The cost to assemble the product is estimated at $17 per unit and the company believes the market would support a price of $68 on the assembled unit.What decision should NF Toy make?

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

Fornelli Inc.can produce 100 units of a component part with the following costs: Direct Materials \ 15,000 Direct Labor 6,500 Variable Overhead 16,000 Fixed Overhead 11,000 If Fornelli Inc.can purchase the component part externally for $44000 and only $4000 of the fixed costs can be avoided what is the correct make-or-buy decision?

Opportunity cost must be considered in decisions involving

If an unprofitable segment is eliminated

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

A company decided to replace an old machine with a new machine.Which of the following is considered a relevant cost?

A segment has the following data: Sales \ 700,000 Variable expenses 300,000 Fixed expenses 550,000 What will be the incremental effect on net income if this segment is eliminated assuming the fixed expenses will be allocated to profitable segments?

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?

What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?

Which statement is true concerning the decision rule on whether to make or buy?

In an equipment replacement decision the cost of the old equipment is a(n)

The basic decision rule in a sell or process further decision is: sell without further processing as long as the incremental revenue from processing exceeds the incremental processing costs.

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

In a decision to retain or replace old equipment the salvage value of the old equipment is relevant in incremental analysis.

The point in the production process when joint products are readily identifiable is the

A special one-time order should never be accepted if the unit sales price is less than the unit variable cost.

Which one of the following does not affect a make-or-buy decision?