Chapter 002, Managerial Accounting and Cost Concepts

| October 3, 2018

128. What is the total
amount of the costs listed above that are direct costs of the Cosmetics
Department?

A.
$66,000

B. $105,000

C.
$62,000

D.
$56,000

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Chapter 002, Managerial Accounting and Cost Concepts

129. What is the total amount of the costs listed above that are
NOT direct costs of the Northridge Store?

A.
$39,000

B. $66,000

C.
$79,000

D.
$147,000

Lucena
Corporation purchased a machine 7 years ago for $339,000 when it launched
product X05K. Unfortunately, this machine has broken down and cannot be
repaired. The machine could be replaced by a new model 360 machine costing $353,000
or by a new model 280 machine costing $332,000. Management has decided to buy
the model 280 machine. It has less capacity than the model 360 machine, but its
capacity is sufficient to continue making product X05K. Management also
considered, but rejected, the alternative of dropping product X05K and not
replacing the old machine. If that were done, the $332,000 invested in the new
machine could instead have been invested in a project that would have returned
a total of $426,000.

130. In making the decision to buy the model 280 machine rather than
the model 360 machine, the differential cost was:
A. $21,000 B. $87,000 C. $7,000 D. $14,000

131. In making the decision to buy the model 280 machine rather than
the model 360 machine, the sunk cost was:
A. $426,000
B. $339,000 C. $332,000 D. $353,000

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Chapter 002, Managerial Accounting and Cost Concepts

132. In making the decision to invest in the model 280 machine,
the opportunity cost was:

A.
$426,000
B.
$353,000

C. $332,000

D.
$339,000

Management of Sourwine
Corporation is considering whether to purchase a new model 320 machine costing
$389,000 or a new model 280 machine costing $318,000 to replace a machine that
was purchased 6 years ago for $376,000. The old machine was used to make
product C78P until it broke down last week. Unfortunately, the old machine
cannot be repaired.

Management has decided to buy the new model 280 machine. It has
less capacity than the new model 320 machine, but its capacity is sufficient to
continue making product C78P.

Management also considered,
but rejected, the alternative of simply dropping product C78P. If that were
done, instead of investing $318,000 in the new machine, the money could be
invested in a project that would return a total of $405,000.

133. In making the decision to buy the model 280 machine rather than
the model 320 machine, the sunk cost was:
A. $376,000
B. $318,000 C. $405,000 D. $389,000

134. In making the decision to buy the model 280 machine rather than
the model 320 machine, the differential cost was:
A. $58,000
B. $13,000 C. $29,000 D. $71,000

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Chapter 002, Managerial Accounting and Cost Concepts

135. In making the decision to invest in the model 280 machine,
the opportunity cost was:

A.
$376,000
B.
$389,000

C. $405,000

D.
$318,000

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