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Exam 24: Differential Analysis and Product Pricing

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Question 71

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What is the contribution margin per machine hour for Bales?

A) $5
B) $7
C) $35
D) $28

E) All of the above
F) None of the above

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Question 72

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In addition to the differential costs in an equipment-replacement decision,the remaining useful life of the old equipment and the estimated life of the new equipment are important considerations.

A) True
B) False

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Question 73

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Since the costs of producing an intermediate product do not change regardless of whether the intermediate product is sold or processed further,these costs are not considered in deciding whether to further process a product.

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit.The unit cost for the business to make the part is $20,including fixed costs,and $11,not including fixed costs.If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity,what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?

What is the contribution per machine hour for Wales?

If the order is accepted,what would be the impact on net income?

Differential revenue is the amount of income that would result from the best available alternative proposed use of cash.

Assume that Widgeon produced enough product with the highest contribution margin per unit to use 1,000 hours of machine time.Product demand does not warrant any more production of that product.What is the maximum additional contribution margin that can be realized by utilizing the remaining 1,000 hours on the product with the second highest contribution margin per hour?

Jarrett Company is considering a cash outlay of $300,000 for the purchase of land,which it could lease out for $36,000 per year.If alternative investments are available that yield a 9% return,the opportunity cost of the purchase of the land is

Which of the following is not a cost concept commonly used in applying the cost-plus approach to product pricing?

What is the amount of income or loss from acceptance of the offer?

Assuming that Widgeon Co.can sell all of the products it can make,what is the maximum contribution margin it can earn per month?

Should the special order be accepted?

Match the definitions that follow with the term (a-e) it defines. -Only includes the costs of manufacturing in product cost per unit

Which of the following reasons would cause a company to reject an offer to accept business at a special price?

What is the activity rate for production setup?

What is the differential cost from the acceptance of the offer?

A cost that will not be affected by later decisions is termed a sunk cost.

The amount of income that would result from an alternative use of cash is called:

The Turtle Company has total estimated factory overhead for the year of $1,200,000,divided into four activities: fabrication,$600,000; assembly,$240,000; setup,$200,000; and materials handling,$160,000.Turtle manufactures two products,Boogie Boards and Surf Boards.The activity-base usage quantities for each product by each activity are as follows: ​ Each product is budgeted for 10,000 units of production for the year.Determine (a)the activity rates for each activity and (b)the factory overhead cost per unit for each product using activity-based costing.