1. The Glitzy Manufacturing Company manufactures a fancy gold pendant used in on

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

Possible Answers

A. $8,000
B. $20,000
C. $16,000
D. $40,000
E. None of the above

2. Management is considering reworking some obsolete wind charms into a more marketable product. In a decision model analyzing these alternatives, an externally would be:

Possible Answers

A. The $20,000 reworking cost.
B. The $45,000 selling price for the new wind charms.
C. The value of avoiding layoffs.
D. The $8,000 scrap value of the existing wind charms.
E. None of the above items are externalities.

3. Which of the following statements about the calculation of product costs using traditional volume based measures is INCORRECT?

Possible Answers

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.

Explanation / Answer

duh a

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