One of the major assumptions limiting the reliability of breakeven analysis is that A. Efficiency and productivity will continually increase.
| One of the major assumptions limiting the reliability of breakeven analysis is that | |||
| A. | Efficiency and productivity will continually increase. | ||
| B. | Total variable costs will remain unchanged over the relevant range. | ||
| C. | Total fixed costs will remain unchanged over the relevant range. | ||
| D. | The cost of production factors varies with changes in technology. | ||
| The breakeven point in units increases when unit costs | |||
| A. | Increase and sales price remains unchanged. | ||
| B. | Decrease and sales price remains unchanged. | ||
| C. | Remain unchanged and sales price increases. | ||
| D. | Decrease and sales price increases. | ||
| A manufacturer has a limited supply of 1,200 lbs of raw materials that can be used to produce either Product X or Y, details of which are given below. Product X Product Y Selling price per unit $200 $250 Variable costs per unit $176 $200 Raw materials used per unit 8 lbs 10 lbs Which one of the following should the manufacturer produce in order to maximize contribution margin? | |||
| A. | 150 units of Product X. | ||
| B. | 120 units of Product Y. | ||
| C. | 100 units of Product X and 40 units of Product Y. | ||
| D. | 100 units of Product X and 80 units of Product Y. | ||
Kator Co. is a manufacturer of industrial components. One of their products that is used as a subcomponent in auto manufacturing is KB-96. This product has the following financial structure per unit:
| Selling price | $150 |
| Direct materials | $ 20 |
| Direct labor | 15 |
| Variable manufacturing overhead | 12 |
| Fixed manufacturing overhead | 30 |
| Shipping and handling | 3 |
| Fixed selling and administrative | 10 |
| Total costs | $ 90 |
Kator Co. has received a special, one-time order for 1,000 KB-96 parts.
| Kator Co. has received a special, one-time order for 1,000 KB-96 parts. Assume that Kator is operating at full capacity and that the contribution margin of the output that would be displaced by the special order is $10,000. Using the original data, the minimum price that is acceptable for this one-time special order is in excess of | |
| A. | $60 |
| B. | $70 |
| C. | $87 |
| D. | $100 |
Panyer Co. is a producer of a tank component. This product, J-5, has the following selling price and costs per unit:
| Selling price | $300 |
| Direct materials | 125 |
| Direct labor | 25 |
| Variable manufacturing overhead | 50 |
| Shipping and handling | 5 |
| Fixed manufacturing overhead | 15 |
| Fixed selling and administrative | 10 |
| Total costs | $230 |
| Panyer has recently received a special, one-time order for 2,000 units of J-5. Panyer currently has enough excess capacity for this order. What should be the minimum price charged by Panyer? | |
| A. | $155 |
| B. | $205 |
| C. | $230 |
| D. | $300 |
| Production of a special order will increase gross profit when the additional revenue from the special order is greater than | |
| A. | The direct materials and labor costs in producing the order. |
| B. | The fixed costs incurred in producing the order. |
| C. | The indirect costs of producing the order. |
| D. | The marginal cost of producing the order. |
| A company’s approach to an insourcing vs. outsourcing decision | |
| A. | Depends on whether the company is operating at or below normal volume. |
| B. | Involves an analysis of avoidable costs. |
| C. | Should use absorption (full) costing. |
| D. | Should use activity-based costing |
| A company manufactures components for use in producing one of its finished products. When 12,000 units are produced, the full cost per unit is $35, separated as follows: Direct materials $ 5 Direct labor 15 Variable overhead 10 Fixed overhead 5 A supplier has offered to sell 12,000 components to the company for $37 each. If the company accepts the offer, some of the facilities currently being used to manufacture the components can be rented as warehouse space for $40,000. However, $3 of the fixed overhead currently applied to each component would have to be covered by the company’s other products. What is the differential cost to the company of purchasing the components from the supplier? | |
| A. | $8,000 |
| B. | $20,000 |
| C. | $24,000 |
| D. | $44,000 |
| The Robo Division, which is part of a large company, has been approached to submit a bid for a potential project for a customer. Robo Division has been informed by the customer that they will not consider bids over $8,000,000. Robo Division purchases its materials internally from the Cross Division. There would be no additional fixed costs for either the Robo or Cross Divisions. Information regarding this project is as follows: Cross Division Robo Division Variable costs $1,500,000 $4,800,000 Transfer price 3,700,000 — If Robo Division submits a bid for $8,000,000, the amount of contribution margin recognized by the Robo Division and the company, respectively, is | |
| A. | $(500,000) and $(2,000,000). |
| B. | $3,200,000 and $(500,000). |
| C. | $(500,000) and $1,700,000. |
| D. | $3,200,000 and $1,700.000. |
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