1. Part J88 is used in one of Quinney Corporation\'s products. The company makes
ID: 2444211 • Letter: 1
Question
1. Part J88 is used in one of Quinney Corporation's products. The company makes 3,000 units of this part each year. The company's Accounting Department reports the following costs of producing the part at this level of activity:An outside supplier has offered to produce this part and sell it to the company for $32.10 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $3,000 of these allocated general overhead costs would be avoided.
If management decides to buy part J88 from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income?
A. Net operating income would decline by $22,200 per year.
B. Net operating income would decline by $16,200 per year.
C. Net operating income would decline by $5,400 per year.
D. Net operating income would decline by $19,200 per year.
2. Wenig Inc. has some material that originally cost $73,500. The material has a scrap value of $45,600 as is, but if reworked at a cost of $6,600, it could be sold for $58,100. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap?
A) -$22,000
B) -$67,600
C) $51,500
D) $5,900
3. Hayase Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $35 to buy from farmers and $14 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $27 or processed further for $11 to make the end product industrial fiber that is sold for $40. The beet juice can be sold as is for $36 or processed further for $21 to make the end product refined sugar that is sold for $46.How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?
A. ($81)
B. $14
C. $5
D. ($9)
4. How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?
A. ($11)
B. ($25)
C. ($36)
D. ($60)
5. Kleffman Corporation is presently making part X31 that is used in one of its products. A total of 2,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity:
An outside supplier has offered to produce and sell the part to the company for $23.40 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $1,000 of these allocated general overhead costs would be avoided.
If management decides to buy part X31 from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income?
A. Net operating income would decline by $5,600 per year.
B. Net operating income would decline by $1,800 per year.
C. Net operating income would decline by $4,600 per year.
D. Net operating income would decline by $6,600 per year.
USE THE FOLLOWING TO ANSWER QUESTIONS 6 AND 7
6. The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of $100,000, they can be sold for a total of $160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.
The sunk cost in this situation is:
A) $720,000.
B) $160,000.
C) $ 50,000.
D) $100,000.
7. What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?
A) $110,000 advantage.
B) $660,000 disadvantage.
C) $ 10,000 advantage.
D) $ 60,000 advantage.
Explanation / Answer
2. with out rework can be scarp value = 45600 with rework can be sell 58100 gain = 12500 -6600 =5900 (incremetal) 3. option "c " is the correct sale = 40+46=86 less: 35+14+11+21 = 81 gain = 5 35+14+11+21 = 81 4.option " b" is near by the answer. sale = 46 cost =35+14+21= 70 lsoss = 24 6) option " a" is the correct answer. sunk cost is the initila cost incurred for the acquiring the inentory. 7) option"c" is the correct answer. here scrap = 50000 if re work cost = 100000 total = 150000 can be sold = 160000 gain 10000Related Questions
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