Q1. Ultimate Production manufactures radon detectors. The standards for materials for each detector is 2 pounds of acrylic at a standard cost of $4.30 per pound. During May, the company purchased 890 pounds and used 830 pounds of acrylic and made 410 radon detectors. The company paid $4.45 per pound for the acrylic. There were 400 detectors budgeted for May. How much is the material price variance?
A) $134 unfavorable
B) $43 unfavorable
C) $177 unfavorable
D) $263 unfavorable
Q2. Ultimate Production manufactures radon detectors. The standards for materials for each detector is 2 pounds of acrylic at a standard cost of $4.30 per pound. During May, the company purchased 890 pounds and used 830 pounds of acrylic and made 410 radon detectors. The company paid $4.45 per pound for the acrylic. There were 400 detectors budgeted for May. How much is the material quantity variance?
A) $134 unfavorable
B) $43 unfavorable
C) $177 unfavorable
D) $263 unfavorable
Q3. A company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which of the following is not relevant to the decision?
A) The selling price of the completed units
B) The costs incurred to process the units to this point
C) The selling price of the partially completed units
D) The costs that will be incurred to finish the units
Q4. Mel's Diner owns a single restaurant, which has a cantina primarily used to seat patrons while they wait on their tables. The company is considering eliminating the cantina. Segmented contribution income statements are as follows and fixed costs applicable to both segments are allocated on the basis of square footage. Restaurant Cantina Total Sales $800,000 $200,000 $1,000,000 Variable costs 475,000 160,000 635,000 Direct fixed costs 50,000 15,000 65,000 Allocated fixed costs 212,500 37,500 250,000 Net income $ 62,500 ($ 12,500) $ 50,000 What effect will occur if Mel's Diner eliminates the cantina if there is no effect on restaurant sales?
A) Net income will increase by $12,500.
B) Net income will decrease to $37,500.
C) Net income will decline by $25,000.
D) Net income will be $62,500.
Q5. Abacus has 800 obsolete calculators that are carried in inventory at a cost of $1,920. If these calculators are upgraded at a cost of $3,100, they could be sold for $4,500. Alternatively, the calculators could be sold "as is" for $1,600. What is the net advantage or disadvantage of reworking the calculators?
A) $1,400 advantage
B) $2,900 advantage
C) $5,440 disadvantage
D) $200 disadvantage
Q6. The following are production and cost data for two products, buckets and pails, produced in batches of 600 each. Buckets Pails Contribution margin per batch $360 $250 Machine set-ups needed per batch 14 9 The company can only perform 9,450 set-ups each period, yet there is unlimited demand for each product. What is the maximum contribution margin for the year?
A) $366,000
B) $243,000
C) $1,050
D) $262,500
Q7. Watson Wheels currently makes 6,000 wheels annually that are used in other products it manufactures. Current unit costs for the wheels are as follows: Direct materials $22.00 Direct labor 16.00 Variable manufacturing overhead 12.00 Fixed manufacturing overhead 15.00 Total $65.00 The company has an offer from a manufacturer to produce the wheels for $60 per wheel. If the company decides to buy the wheels, the empty warehouse space could be rented for $22,000 annually. In addition, half of the fixed manufacturing overhead costs would be avoided if the company decides to buy the wheels. If the company decides to accept the offer, what is the incremental effect on the company's net income?
A) A savings of $7,000
B) A savings of $37,000
C) A decrease in net income of $15,000
D) An increase in net income of $52,000
Q8. Blue Chip Company sells gears for $9 per unit. The unit cost of each gear follows: Direct materials $1.50 Direct labor 2.20 Manufacturing overhead 2.10 Total $5.80 An order to purchase 4,000 gears was recently received from a new customer. There is enough capacity to fill the order and filling this order would not disrupt current operations. Blue Chip Company would incur an additional $1.80 per gear for shipping costs. Half of the manufacturing overhead costs are fixed and would be incurred no matter how many units are produced. In negotiating a price, how much is the minimum acceptable selling price?
A) $7.60
B) $5.80
C) $4.75
D) $6.55
Q9. B&B Flooring produced 8,000 yards of its economy-grade carpet. In the coloring process, there was a pigment defect and the resulting color faded. The carpet normally sells for $18 per yard, with $6 of variable cost per yard and $3 of fixed cost per yard assigned to the carpet. The company realizes that it cannot sell the faded carpet for $18 per yard through its normal channels, unless the coloring process is repeated. The incremental cost of the coloring process is $4 per yard. Ace Apartments is willing to buy the carpet in its current faded condition for $13 per yard. Should B&B repeat the coloring process or sell the carpet to Ace Apartments?
A) Repeat coloring for $8,000 benefit
B) Sell 'as is' to Ace for $32,000 benefit
C) Repeat coloring for $56,000 benefit
D) Sell 'as is' to Ace for $56,000 benefit
Q10. Foot Print has three product lines in its retail stores: shoes, boots, and sandals. The allocated fixed costs are based on units sold and are unavoidable. Results of June follow: Socks Boots Sandals Total Units sold 800 1,200 2,400 4,400 Revenue $24,800 $30,400 $36,600 $91,800 Variable costs 13,600 13,200 16,800 43,600 Direct fixed costs 5,000 7,000 6,500 18,500 Allocated fixed costs 8,000 9,000 8,000 25,000 Net income (loss) $(1,800) $ 1,200 $ 5,300 $ 4,700 Demand of individual products is not affected by changes in other product lines. How much is the incremental effect on income of dropping socks?
A) Decrease of $11,200
B) Decrease of $6,200
C) Increase of $1,800
D) Decrease of $1,500
Q11. When operating in a constrained environment, which products should be produced?
A) Those with the highest contribution margin per unit
B) Those with the highest contribution margin per unit of the constrained process
C) Those with the highest selling price
D) Those with the lowest allocated joint cost
Q12. Raintree makes 2 products, rain jackets and rain pants. Each passes through the cutting machine, which is the binding constraint. Rain jackets take 16 minutes on the cutting machine and have a contribution margin per jacket of $20. Rain pants take 24 minutes on the cutting machine and have a contribution margin per pair of pants of $32. Which product should be made if there is unlimited demand for each?
A) Rain jackets
B) Rain pants
C) An equal number of pants and jackets
D) There is not enough information provided to answer.
Q13. Raintree makes 2 products, rain jackets and rain pants. Each passes through the cutting machine, which is the binding constraint. Rain jackets take 12 minutes on the cutting machine and have a contribution margin per jacket of $16. Rain pants take 24 minutes on the cutting machine and have a contribution margin per pair of pants of $32. Assume that there are 4,800 hours available on the cutting machine and that the minimum demand for each product is 3,000 units. How many of each product should be made?
A) 3,000 jackets and 10,500 pants
B) 600 jackets and 4,200 pants
C) 3,600 jackets and 1,200 pants
D) 3,000 jackets and 3,000 pants
Q14. Raintree makes 2 products, rain jackets and rain pants. Each passes through the cutting machine, which is the binding constraint. Rain jackets take 12 minutes on the cutting machine and have a contribution margin per jacket of $16. Rain pants take 24 minutes on the cutting machine and have a contribution margin per pair of pants of $32.Assume that there are 4,800 hours available on the cutting machine and that the minimum demand for each product is 3,000 units. If 100 more hours of machine time can be obtained, how much will profits increase?
A) $1,600
B) $3,200
C) $8,000
D) None of these answer choices are correct.