Question

QUESTION 15

1. If West Star received a special order for 500 computers at a price of $275, what will be the effect on the company's profit if the order is accepted? (Assume that other variables do not change).

Direct materials			$48
Direct labor			$90
Variable manufacturing overhead			$62
Direct fixed manufacturing overhead			$40
Indirect fixed manufacturing overhead			$40
		Increase $7,500
		Increase $17,500
		$37,500
		$2,500

QUESTION 16

1. Newell Company presently has three product lines: paper, stamps, and computer ribbons The company is considering discontinuing the stamp line. Given the following information, if Newel discontinues the stamp line, what would the net income be?

Sales revenue			$48,000
Variable costs			($30,000)
Direct fixed costs			($12,000)
Indirect fixed costs			($9,000)
Not Loss			($3,000)
		Increase by $3,000
		Decrease by $6,000
		Decrease by $9,000
		Decrease by $12,000

QUESTION 17

1. How much cash will be needed to pay the following general and administrative expenses?

Advertising expense			$4,500
Executive salaries expense			$10,000
Depreciation expense			$5,250
Amortization of patent			$1,225
Interest expense			$750
		$15,250
		$20,500
		$21,725
		None of the above

QUESTION 18

1. Using the following infomration relating to Royal One Company's operations for the monht of July, determine the labor rate variance.

Actual quanity of materials used			11,000 pounds
Standard quantity of materials used			10,000 pounds
Actual price of materials			$4.00
Standard price of materials			$3.80
Actual direct labor hours			20,000
Standard direct labor hours			21,000
Actual direct labor rate			$7.50
Standard direct labor rate			$7.00
		$10,000 unfavorable
		$10,000 favorable
		$10,500 unfavorable
		$10,500 favorable

QUESTION 19

1. Profit center managers are most often evaluaed on the basis of:

		A comparison of actual to standard costs
		Segment margin
		Return on investment
		Earnings per share

QUESTION 20

1. Costs that a manager cannot adjust are called;

		Direct costs
		Indirect costs
		Uncontrollable costs
		Segment costs

Answer 1

Question 15

Correct answer------------Increase by $37,500.

Working

Calculation of Additional Cost of Order
	Per Unit	Total
Direct material	$                    48.00	$ 24,000
Direct labor	$                    90.00	$ 45,000
Variable manufacturing overheads	$                    62.00	$ 31,000
Total Additional cost due to acceptance of order	$                  200.00	$ 100,000

.

financial advantage (disadvantage) of accepting the special order
Additional Revenue from offer (500 x $275)	$ 137,500
Less: Total Additional cost due to acceptance of offer	$ 100,000
Financial Advantage	$ 37,500