***PLEASE SHOW ALL WORK TO GET RATING*** Thanks in advance! 1. Wave-Zone Company
ID: 2372281 • Letter: #
Question
***PLEASE SHOW ALL WORK TO GET RATING*** Thanks in advance!
1. Wave-Zone Company has 10,000 units of its sole product that it produced last year at a cost of $50 each. This year's model is superior to last year's and the 10,000 units cannot be sold for their regular selling price of $75 each. Wave-Zone has two alternatives for these items: (1) they can be sold to a wholesaler for $5 each, or (2) they can be reworked at a total cost of $190,000 and then sold for $22.50 each. The company has enough idle capacity to rework these items without affecting any new production. Which choice would increase the company's profits the most?
(A)
Scrapping, because profit will increase by $50,000 more than reworking.
(B)
Reworking, because profit will increase by $15,000 more than scrapping.
(C)
Scrapping, because profit will increase by $15,000 more than reworking.
(D)
Reworking, because profit will increase by $35,000 more than scrapping.
(E)
Reworking because profit will increase by $50,000 more than scrapping.
2. To determine a product selling price based on the total cost method, management should include:
A)
Total nonproduction costs plus a markup.
(B)
Total production and nonproduction costs plus a markup.
(C)
Total production and nonproduction costs only.
(D)
Only a markup.
(E)
Total production costs plus a markup.
3. An opportunity cost:
A)
Requires a current outlay of cash.
(B)
Is the lost benefit of choosing an alternative course of action.
(C)
Results from past managerial decisions.
(D)
Is an unavoidable cost.
(E)
Is irrelevant in decision making.
4. A company has the choice of either selling 1,000 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $4.00 per unit. Alternatively, it could rebuild them with incremental costs of $1.00 per unit for materials, $2.00 per unit for labor, and $1.50 per unit for overhead, and then sell the rebuilt units for $8.00 each. What should the company do?
A)
Throw the units away.
(B)
Rebuild the units.
(C)
Sell the units as scrap.
(D)
It does not matter because both alternatives have the same result.
(E)
Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently
(A)
$500 decrease.
(B)
$500 increase.
(C)
$4,000 decrease.
(D)
$3,500 decrease.
(E)
$4,000 increase.
6.A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n):
(A)
Out-of-pocket cost.
(B)
Uncontrollable cost.
(C)
Opportunity cost.
(D)
Incremental cost.
(E)
Sunk cost.
Which product(s) should not be processed further?
(A)
Acta.
(B)
Corda.
(C)
Fando.
(D)
Limo.
(E)
None of the products should be processed further.
(A)
5,000 units of cap B.
(B)
1,000 units of cap A and 5,000 units of cap B.
(C)
10,000 units of cap A.
(D)
1,000 units of cap A and 4,500 units of cap B.
(E)
1,000 units of cap A and 6,000 units of cap B.
9. Product X requires 10 machine hours per unit to be produced, Product Y requires only 6 machine hours per unit, and the company's productive capacity is limited to 240,000 machine hours. Product A sells for $32 per unit and has variable costs of $12 per unit. Product B sells for $24 per unit and has variable costs of $7 per unit. Assuming the company can sell as many units of either product as it produces, the company should:
(A)
Produce X and Y in the ratio of 40% X and 60% Y.
(B)
Produce only Product X.
(C)
Produce X and Y in the ratio of 62.5% X to 37.5% Y.
(D)
Produce only Product Y.
(E)
Produce equal amounts of X and Y.
(A)
$23
(B)
$5
(C)
$50
(D)
$27
(E)
$45
11.Sandlewood Company has 15,000 units of its sole product that it produced last year at a cost of $43 each. This year's model is superior to last year's and the 15,000 units cannot be sold for their regular selling price of $80 each. Sandlewood has two alternatives for these items: (1) they can be sold to a wholesaler for $30 each, or (2) they can be reworked at a total cost of $400,000 and then sold for $60 each. The company has enough idle capacity to rework these items without affecting any new production. Which choice would increase the company's profits the most?
(A)
Reworking, because profit will increase by $50,000 more than scrapping.
(B)
Scrapping, because profit will increase by $50,000 more than reworking.
(C)
Reworking, because profit will increase by $500,000 more than scrapping.
(D)
Reworking because profit will increase by $450,000 more than scrapping.
(E)
Scrapping, because profit will increase by $450,000 more than reworking.
12.Patrick Corporation inadvertently produced 10,000 defective personal radios. The radios cost $8 each to produce. A salvage company will purchase the defective units as they are for $3 each. Patrick's production manager reports that the defects can be corrected for $5 per unit, enabling them to be sold at their regular market price of $12.50. Patrick should:
rev: 06_01_2012
(A)
Since both options will result in the same amount of revenue, non-financial factors should be considered in making the decision.
(B)
Sell 5,000 radios to the salvage company and repair the remainder.
(C)
Sell the radios as they are because repairing them will cause their total cost to exceed their selling price.
(D)
Throw the radios away.
(E)
Correct the defects and sell the radios at the regular price.
13.Hondo Company has a machine with a book value of $50,000 and a five year remaining life. A new machine is available at a cost of $108,000 and Rocko can also receive $38,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $14,000 per year over its five year life. Should the machine be replaced?
(A)
No, because the company will be $108,000 worse off.
(B)
Hondo will not be better or worse off by replacing the machine.
(C)
Yes, because income will increase by $14,000 per year.
(D)
Yes, because income will increase by $52,000 immediately.
(E)
No, because the income will decrease by $14,000 per year.
(A)
Scrapping, because profit will increase by $50,000 more than reworking.
(B)
Reworking, because profit will increase by $15,000 more than scrapping.
(C)
Scrapping, because profit will increase by $15,000 more than reworking.
(D)
Reworking, because profit will increase by $35,000 more than scrapping.
(E)
Reworking because profit will increase by $50,000 more than scrapping.
Explanation / Answer
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