51. If Teague wishes to earn $1,250 on the special order, the size of the order would need to be:
A. 4,500 units
B. 2,250 units
C. 1,125 units
D. 625 units
E. 300 units
52. Textel is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units follows:
Direct material
|
$45,000
|
Direct labor
|
30,000
|
Factory overhead (1/3 is variable)
|
98,000
|
If Textel can buy 1,000 units from a subcontractor for $100,000, it should:
A. Make the product because current factory overhead is less than $100,000.
B. Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000.
C. Buy the product because the total incremental costs of manufacturing are greater than $100,000.
D. Buy the product because total fixed and variable manufacturing costs are greater than $100,000
E. Make the product because factory overhead is a sunk cost.
53. 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. Sell the units as scrap.
B. Rebuild the units.
C. It does not matter because both alternatives have the same result.
D. Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently.
E. Throw the units away.
54. A company has the choice of either selling 500 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $7.00 per unit. Alternatively, it could rebuild them with incremental costs of $2.00 per unit for materials, $3per unit for labor, and $1 per unit for overhead, and then sell the rebuilt units for $15 each. What should the company do?
A. Sell the units as scrap.
B. Rebuild the units.
C. It does not matter because both alternatives have the same result.
D. Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently.
E. Throw the units away.
55. A company has the choice of either selling 750 defective units as scrap or rebuilding them. They have already spent $14 per unit making these items. The company could sell the defective units as they are for $8 per unit. Alternatively, it could rebuild them with incremental costs of $3 per unit for materials, $3per unit for labor, and $1per unit for overhead, and then sell the rebuilt units for $15.00 each. What should the company do?
A. Sell the units as scrap.
B. Rebuild the units.
C. It does not matter because both alternatives have the same result.
D. Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently.
E. Throw the units away.
56. Thompson Company had the following results of operations for the past year:
Sales (16,000 units at $10)
|
|
$160,000
|
|
Direct materials and direct labor
|
$96,000
|
|
|
Overhead (20% variable)
|
16,000
|
|
|
Selling and administrative expenses (all fixed)
|
32,000
|
(144,000
|
)
|
Operating income
|
|
$ 16,000
|
|
|
|
|
|
A foreign company (whose sales will not affect Thompson's market) offers to buy 4,000 units at $7.50 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $600 and selling and administrative costs by $300. If Thompson accepts the offer, its profits will:
A. Increase by $30,000
B. Increase by $ 6,000
C. Decrease by $ 6,000
D. Increase by $ 5,200
E. Increase by $ 4,300
57. To determine a product selling price based on the total cost method, management should include:
A. Total production and nonproduction costs plus a markup.
B. Total production and nonproduction costs only.
C. Total production costs plus a markup.
D. Total nonproduction costs plus a markup.
E. Only a markup.
58. Which of the following should be classified as production costs?
A. Direct materials and selling costs.
B. Direct labor and administrative costs.
C. Manufacturing overhead and selling and administrative costs.
D. Direct materials, direct labor, and selling and administrative costs.
E. Direct materials, direct labor, and manufacturing overhead.
59. Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit?
A. Total cost times markup percentage.
B. Total cost per unit times markup percentage per unit.
C. Total cost per unit divided by markup percentage per unit.
D. Markup percentage per unit divided by total cost per unit.
E. Markup percentage divided by total cost.
60. Assume that Charlie’s Brownies expects to produce and sell 5,000 units of a single product, a gift box containing an assortment of brownies that showcases the company’s many flavors. The following additional company information is available:
Variable costs (per unit)
|
|
Production costs
|
$30
|
Nonproduction costs
|
$2
|
Fixed costs (in total)
|
|
Overhead
|
$100,000
|
Nonproduction
|
$5,000
|
Compute Charlie’s Brownies total cost per unit.
A. $32
B. $50
C. $53
D. $3
E. $21