1. The Glitzy Manufacturing Company manufactures a fancy gold pendant used in on
ID: 2435470 • Letter: 1
Question
1. The Glitzy Manufacturing Company manufactures a fancy gold pendant used in one of its necklaces. The Someare Diamond Company offers to sell 12,000 pendants to Glitzy for $37 each. If Glitzy accepts the offer, it can rent some of the facilities it currently uses to manufacture pendants as warehouse space for $40,000. What is the differential profit to Glitzy if they purchase the pendants from Someare Diamond Company?
At a production rate of 12,000 units, the full cost per unit includes:
Direct Materials $ 5
Direct Labor 20
Variable Overhead 10
Fixed Overhead 15
Total $50
A. $8,000
B. $20,000
C. $16,000
D. $40,000
E. None of the above
2. Which of the following statements about the calculation of product costs using traditional volume based measures is INCORRECT?
A. Traditional volume-based costing uses a single cost pool for each responsibility center or the entire factory.
B. Overhead is allocated using a single volume cost driver like direct labor hours.
C. Direct Materials and Direct Labor are allocated using volume based cost drivers.
D. Product costs consist of Direct Materials plus Direct Labor plus volume based overhead.
E. All of the above correctly describe product costing systems using traditional volume-based accounting systems.
3. Which of the following statements about the calculation of product costs using traditional volume based measures is INCORRECT?
A. Traditional volume-based costing uses a single cost pool for each responsibility center or the entire factory.
B. Overhead is allocated using a single volume cost driver like direct labor hours.
C. Direct Materials and Direct Labor are allocated using volume based cost drivers.
D. Product costs consist of Direct Materials plus Direct Labor plus volume based overhead.
E. All of the above correctly describe product costing systems using traditional volume-based accounting systems.
04. Pick A Citrus has two product lines Apples and Lemons. Each is managed as a separate division. Common costs are allocated based upon Sales Revenue. If Lemons are dropped and the accounting statement is operating within its relevant range what will be the change in profits for the company as a whole?
A. Decrease of $15,000.
B. Decrease of $12,000.
C. Decrease of $9,000.
D. Decrease of $5,000.
E. None of the above is correct.
Explanation / Answer
1. The Glitzy Manufacturing Company manufactures a fancy gold pendant used in one of its necklaces. The Someare Diamond Company offers to sell 12,000 pendants to Glitzy for $37 each. If Glitzy accepts the offer, it can rent some of the facilities it currently uses to manufacture pendants as warehouse space for $40,000. What is the differential profit to Glitzy if they purchase the pendants from Someare Diamond Company? At a production rate of 12,000 units, the full cost per unit includes: Direct Materials $ 5 Direct Labor 20 Variable Overhead 10 Total $35 To be paid for buying $37 Extra payment $2 Total Extra Payment $24,000 Revenue from warehouse rent $40,000 Savings $16,000 C. $16,000 2. Which of the following statements about the calculation of product costs using traditional volume based measures is INCORRECT? E. All of the above correctly describe product costing systems using traditional volume-based accounting systems. 3. Which of the following statements about the calculation of product costs using traditional volume based measures is INCORRECT? E. All of the above correctly describe product costing systems using traditional volume-based accounting systems. 04. Pick A Citrus has two product lines Apples and Lemons. Each is managed as a separate division. Common costs are allocated based upon Sales Revenue. If Lemons are dropped and the accounting statement is operating within its relevant range what will be the change in profits for the company as a whole? Contribution Margin $15,000 will be the loss. A. Decrease of $15,000.
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