Question 1 Stein Mart company INC is considering a special order for 1,000 units
ID: 2441934 • Letter: Q
Question
Question 1
Stein Mart company INC is considering a special order for 1,000 units to be priced at $8.90 (the normal price would be $11.50). The order would require specialized materials costing $4.00 per unit. Direct labor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20 per unit. However, the company has excess capacity and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing $1,300. Which of the following is relevant to the special order?
Answer
$11.50 normal selling price
$1.20 fixed factory overhead per unit
$7.35 spent on donuts and coffee
$8.90 selling price per unit of special order
none of these
Question 2
Figure 12-1.
Stein Company makes carpets. A customer wants to place a special order for 1,000 carpets in navy blue with the company logo woven in the middle, to be priced at $30 each. Normally, Stein would charge $60 per carpet for this type of order. Stein figures that yarn and backing will cost $12 per carpet, variable overhead (machining, electricity) is $5 per carpet, direct labor is $10 per carpet, and one setup will be required at $800 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the carpets are working at Stein. Their wages will be paid whether or not the special order is accepted. Stein’s policy is to avoid layoffs to the extent possible.
Refer to Figure 12-1. Which costs of the special order relate to flexible resources?
Answer
yarn and backing
yarn, backing and variable overhead
depreciation on machinery
yarn, backing, and direct labor
yarn, backing, direct labor, and setup labor
Question 3
Figure 12-1.
Stein Company makes carpets. A customer wants to place a special order for 1,000 carpets in navy blue with the company logo woven in the middle, to be priced at $30 each. Normally, Stein would charge $60 per carpet for this type of order. Stein figures that yarn and backing will cost $12 per carpet, variable overhead (machining, electricity) is $5 per carpet, direct labor is $10 per carpet, and one setup will be required at $800 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the carpets are working at Stein. Their wages will be paid whether or not the special order is accepted. Stein’s policy is to avoid layoffs to the extent possible.
Refer to Figure 12-1. Which of the following is a qualitative factor that Stein would consider in making the decision to accept or reject the special order?
Answer
cost of yarn and backing
cost of setup labor
the no-layoff policy
the use of machinery
the machining and electricity
Question 4
Figure 12-1.
Stein Company makes carpets. A customer wants to place a special order for 1,000 carpets in navy blue with the company logo woven in the middle, to be priced at $30 each. Normally, Stein would charge $60 per carpet for this type of order. Stein figures that yarn and backing will cost $12 per carpet, variable overhead (machining, electricity) is $5 per carpet, direct labor is $10 per carpet, and one setup will be required at $800 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the carpets are working at Stein. Their wages will be paid whether or not the special order is accepted. Stein’s policy is to avoid layoffs to the extent possible.
Refer to Figure 12-1. Which of the following is irrelevant to the special order decision?
Answer
cost of yarn and backing
direct labor cost
machining and electricity cost
$30 price
all of these are relevant
Question 5
Figure 12-1.
Stein Company makes carpets. A customer wants to place a special order for 1,000 carpets in navy blue with the company logo woven in the middle, to be priced at $30 each. Normally, Stein would charge $60 per carpet for this type of order. Stein figures that yarn and backing will cost $12 per carpet, variable overhead (machining, electricity) is $5 per carpet, direct labor is $10 per carpet, and one setup will be required at $800 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the carpets are working at Stein. Their wages will be paid whether or not the special order is accepted. Stein’s policy is to avoid layoffs to the extent possible.
Refer to Figure 12-1. If Stein accepts the special order, by how much will operating income increase or decrease?
Answer
$13,000 increase
$13,000 decrease
$3,000 increase
$3,000 decrease
there will be no effect on operating income
Question 6
Figure 12-3.
Elegance Bath Products, Inc. (EBP), a subsidary of Stein company makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable cost of $450. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The specialized molding equipment has 4,050 hours of capacity per year. A sink uses an average of 2 hours of specialized molding equipment time; a tub uses an average of 5 hours of specialized molding equipment time.
Refer to Figure 12-3. What is the contribution margin per hour of specialized molding equipment time for sinks?
Answer
$35.00
$33.33
$70.00
$200.00
$68.33
Question 7
Figure 12-3.
Elegance Bath Products, Inc. (EBP) makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable cost of $450. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The specialized molding equipment has 4,050 hours of capacity per year. A sink uses an average of 2 hours of specialized molding equipment time; a tub uses an average of 5 hours of specialized molding equipment time.
Refer to Figure 12-3. Assume that EBP can sell as many as 1,000 sinks and 500 tubs per year. How many tubs should EBP produce?
Answer
1,000
500
410
675
zero
Question 8
Figure 12-3.
Elegance Bath Products, Inc. (EBP) makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable cost of $450. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The specialized molding equipment has 4,050 hours of capacity per year. A sink uses an average of 2 hours of specialized molding equipment time; a tub uses an average of 5 hours of specialized molding equipment time.
Refer to Figure 12-3. What is the contribution margin per hour of specialized molding time for tubs?
Answer
$35.00
$30.00
$70.00
$200.00
$68.33
Question 9
Figure 12-3.
Elegance Bath Products, Inc. (EBP) makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable cost of $450. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The specialized molding equipment has 4,050 hours of capacity per year. A sink uses an average of 2 hours of specialized molding equipment time; a tub uses an average of 5 hours of specialized molding equipment time.
Refer to Figure 12-3. Assuming that specialized molding equipment time is the only constrained resource, and that EBP can sell as many tubs and sinks as it can produce, how many sinks should be sold?
Answer
2,050
2,025
zero
4,050
810
Question 10
Parron Company a subsidary of Stein company sets price equal to cost plus 60%. Recently, Parron charged a customer a price of $42 for an item. What was the cost of the item to Parron?
Answer
$26.25
$42
$25.20
$67.20
$40.32
Question 11
Brorsen, Inc.,a susidary of Stein company has just designed a new product with a target cost of $64. Brorsen requires new product to have a profit of 20%. What is the target price for the new product?
Answer
$64
$12.80
$320
$80
$53
Stein Mart company INC is considering a special order for 1,000 units to be priced at $8.90 (the normal price would be $11.50). The order would require specialized materials costing $4.00 per unit. Direct labor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20 per unit. However, the company has excess capacity and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing $1,300. Which of the following is relevant to the special order?
Answer
$11.50 normal selling price
$1.20 fixed factory overhead per unit
$7.35 spent on donuts and coffee
$8.90 selling price per unit of special order
none of these
Explanation / Answer
Question 1 The selling price of special order of $8.90 Question 2 Yarn backing and variable overheads Question 3 cost of set up labor Question 4 All of these are relavent question 5 there is no effect on the operating income as the cost of the order and the sale are the same. question6 $35 per hour sales-variable cost 150-80=70 contribution per hour=70/2=35 question8 the contribution per tub per hour is 30 sales-variable cost/no of hours 600-450/5=30 question 9 2025 sinks can be produced total machine hours 4050 machine hour required to make sink =2 hrs so total sinks can be produced=4050/2=2025 question 10 let the cost be 100, then the selling price is 160 if the selling price is 42, then the cost price 42*100/160=26.25 question 11 the target price is 12.80 let the cost is 64, and the profit margin is 20% on cost so 64*20/100=12.80 question 8 the actual production of tubs =810 total machine hours=4050 machine hours required to make a tub=5 hrs so tubs can be produced=4050/5=810 so answer is matching with this
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