A general rule in relevant cost analysis is:

| April 14, 2018

1.A general rule in relevant cost analysis is:o Depreciation is always irrelevant.o Variable costs are always relevant.o Differential future costs and revenues are always relevant.o Fixed costs are always irrelevant.2.Which of the following are valid reasons for eliminating a product line?oooo3.The product line’s contribution margin is negative.The product line’s traceable fixed costs plus its allocated common corporate costsare less than its contribution margin.Both I and IINeither I nor IIOnly IOnly IIIn a sell or process further decision, which of the following costs are relevant?I. A variable production cost incurred prior to the split-off point.II. An avoidable fixed production cost incurred after the split-off point.o Only Io Both I and IIo Neither I nor IIo Only II4.Goldberg Corporation is preparing a bid for a special order that would require 720 liters ofmaterial U48N. The company already has 560 liters of this raw material in stock that originallycost $6.30 per liter. Material U48N is used in the company’s main product and is replenished on aperiodic basis. The resale value of the existing stock of the material is $5.80 per liter. New stocksof the material can be readily purchased for $6.65 per liter. What is the relevant cost of the 720liters of the raw material when deciding how much to bid on the special order?o $4,592o $4,456o $4,176o $4,7885.Magnificent Corporation is a specialty component manufacturer with idle capacity. Managementwould like to use its extra capacity to generate additional profits. A potential customer has offeredto buy 6,200 units of component VFG. Each unit of VFG requires 8 units of material C79 and 6units of material X70. Data concerning these two materials follow:MaterialUnits inStockC79X7032,42031,060OriginalCost PerUnit$3.80$9.30CurrentMarket PricePer Unit$3.35$9.60DisposalValue PerUnit$3.10$8.35Material C79 is in use in many of the company’s products and is routinely replenished. Material X70 is nolonger used by the company in any of its normal products and existing stocks would not be replenishedonce they are used up.What would be the relevant cost of the materials, in total, for purposes of determining a minimumacceptable price for the order for product VFG?o $523,280o$484,455o $528,551o $476,3506.Mattson Inc. regularly uses material Y321 and currently has in stock 460 liters of the material forwhich it paid $2,622 several weeks ago. If this were to be sold as is on the open market as surplusmaterial, it would fetch $5.25 per liter. New stocks of the material can be purchased on the openmarket for $5.85 per liter, but it must be purchased in lots of 1,000 liters. You have been asked todetermine the relevant cost of 800 liters of the material to be used in a job for a customer. Therelevant cost of the 800 liters of material Y321 is:o $4,680o $5,850oo7.$4,404$4,200Eagles Inc. is considering using stocks of an old raw material in a special project. The specialproject would require all 160 kilograms of the raw material that are in stock and that originallycost the company $1,136 in total. If the company were to buy new supplies of this raw material onthe open market, it would cost $7.25 per kilogram. However, the company has no other use for thisraw material and would sell it at the discounted price of $6.50 per kilogram if it were not used inthe special project. The sale of the raw material would involve delivery to the purchaser at a totalcost of $75 for all 160 kilograms. What is the relevant cost of the 160 kilograms of the rawmaterial when deciding whether to proceed with the special project?o $1,040o$o$o$8.A study has been conducted to determine if Product B should be dropped. Sales of the producttotal $200,000 per year; variable expenses total $140,000 per year. Fixed expenses charged to theproduct total $90,000 per year. The company estimates that $40,000 of these fixed expenses willcontinue even if the product is dropped. These data indicate that if Product B is dropped, thecompany’s overall net operating income would:o decrease by $10,000 per year.o increase by$20,000 per year.o increase by $30,000 peryear.o decrease by $20,000 per year.9.The Ketchup Company has two divisions–North and South. The divisions have the followingrevenues and expenses:SalesVariable expensesTraceable fixed expensesAllocated common corporate expensesNet operating income (loss)North$900,000$450,000$260,000$240,000$(50,000)South$800,000$300,000$210,000$190,000$100,000Management at Ketchup is pondering the elimination of North Division. If North Division were eliminated,its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected.Given these data, the elimination of North Division would result in an overall company net operatingincome of:o $50,000o $150,000o $100,00o0$(140,000)10.Reds Inc. manufactures jet engines for the U.S. military on a cost-plus basis. The production costof a particular tank is shown below:Direct materialsDirect laborManufacturing overhead:Supervisor’s salaryFringe benefits on direct laborDepreciationRentTotal cost$200,000$150,000$20,000$15,000$12,000$11,000$408,000If production of this engine was discontinued, the production capacity would be idle, and the supervisorwould be laid off. The depreciation referred to above is for special equipment that would have no resalevalue and that does not wear out through use. When asked to bid on the next contract for this engine, theminimum unit price that Reds Inc. should bid is:o $408,000o $397,000o $385,000o $365,00011. Product Z456 has been considered a drag on profits at Bosco Inc. for some time and management isconsidering discontinuing the product altogether. Data from the company’s accounting system appearbelow:SalesVariable expensesFixed manufacturing expensesFixed selling and administrative expenses$270,000$132,000$95,000$65,000In the company’s accounting system all fixed expenses of the company are fully allocated to products.Further investigation has revealed that $49,000 of the fixed manufacturing expenses and $30,000 of thefixed selling and administrative expenses are avoidable if product Z456 is discontinued. What would be theeffect on the company’s overall net operating income if product Z456 were dropped?o Overall net operating income would decrease by $59,000.o Overall net operating income would decrease by $22,000.o Overall net operating income would increase by $59,000.o Overall net operating income would increase by $22,000.12.Electric Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity. Electric’splant manager is considering making the headlights now being purchased from an outside supplierfor $11 each. The Electric plant has idle equipment that could be used to manufacture theheadlights. The design engineer estimates that each headlight requires $4 of direct materials, $3 ofdirect labor, and $6.00 of manufacturing overhead. Forty percent of the manufacturing overhead isa fixed cost that would be unaffected by this decision. A decision by Electric Company tomanufacture the headlights should result in a net gain (loss) for each headlight of:$1.60oo $0.40o $2.80o $2.0013.Part 51 is used in one of Genjson Corporation’s products. The company makes 18,000 units of thispart each year. The company’s Accounting Department reports the following costs of producingthe part at this level of activity:Per UnitDirect materials$1.20Direct labor$2.20Variable manufacturing overhead$3.30Supervisor’s salary$1.00Depreciation of special equipment$2.70Allocated general overhead$8.50An outside supplier has offered to produce this part and sell it to the company for $15.80 each. If this offeris accepted, the supervisor’s salary and all of the variable costs, including direct labor, can be avoided. Thespecial equipment used to make the part was purchased many years ago and has no salvage value or otheruse. The allocated general overhead represents fixed costs of the entire company. If the outside supplier’soffer were accepted, only $26,000 of these allocated general overhead costs would be avoided.If management decides to buy part 51 from the outside supplier rather than to continue making the part,what would be the annual impact on the company’s overall net operating income?o Net operating income would decline by $81,800 per year.o Net operating income would decline by $29,800 per year.o Net operating income would decline by $119,800 per year.o Net operating incomewould decline by $55,800per year.14.Consider the following production and cost data for two products, X and Y:Product X Product YContribution margin per unit$24$18Machine-hours needed per unit 3 hours2 hoursThe company has 15,000 machine hours available each period, and there is unlimited demand for eachproduct. What is the largest possible total contribution margin that can be realized each period?o $125,000o $120,000o $150,000o $135,00015.The constraint at Bozo Corporation is time on a particular machine. The company makes threeproducts that use this machine. Data concerning those products appear below:Selling price per unitVariable cost per unitMinutes on the constraintUEBICR$334.96 $228.24 $198.99$259.70 $173.52 $160.055.303.603.30Assume that sufficient time is available on the constrained machine to satisfy demand for all but the leastprofitable product. Up to how much should the company be willing to pay to acquire more of theconstrained resource?o $11.80 per minuteo $38.94operunito $75.26perunit$15.20 per minute

Order your essay today and save 30% with the discount code: ESSAYHELP
Order your essay today and save 30% with the discount code: ESSAYHELPOrder Now