Question

24. Which of the following costs are variable? 10,000 Units 30,000 Units $100,000 40,000 90,000 50,000 Cost $300,000 240,000 90,000 150,000 2. 4. A) only 2 B) only 1 C) 1 and 2 D) 1 and4 25. Eddy Company is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Eddy Company would sell it for $135. The cost to assemble the product is estimated at $27 per unit and Eddy Company believes the market would support a price of $174 on the assembled unit. What is the correct decision using the sell or process further decision rule? A) Process further, the company will be better off by $39 per unit. B) Sell before assembly, the company will be better off by $39 per unit. C) Sell before assembly, the company will be better off by $27 per unit. D) Process further, the company will be better off by $12 per unit. 26. North Division has the following information: Sales Variable expenses Fixed expenses If this division is eliminated, the fixed expenses will be allocated to the company's other divisions. What is the incremental effect on net income if the division is dropped? $1,200,000 640,000 620,000 A) $60,000 increase B) $620,000 decrease C) $580,000 increase D) $560,000 decrease 27. In a CVP income statement, a selling expense is generally A) completely a variable cost. B) partly a variable cost and partly a fixed cost. C) neither a variable cost nor a fixed cost. D) completely a fixed cost. 32. Edgar, Inc. has a materials standard of $2.00 per pound. eas were purchased at $2.20 a pound. The actual quantity of materials used was materials were Six thousand pounds of price pounds, although the standard quantity allowed for the output was 5,400 pounds. Edgar, Inc.'s materials quantity variance is A) $1,320 U. B) $1,200 U. C) $1,200 F. D) $1,320 F. 33. Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: New Machine $600,000 Old Machine $300,000 90,000 10 years Price Accumulated Depreciation Remaining useful life Useful life Annual operating costs 10 years $180,600 $240,000 If the old machine is replaced, it can be sold for $24,000. Which of the following amounts is relevant to the replacement decision? A) $59,400 B) $210,000 C) $90,000 D) $300,000 34. Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employes of the company are $12.00 per hour. Manufacturing overhead is applied at a rate of 1 10% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to 4,500 pounds in ending inventory. have What is the total amount to be budgeted in pounds for direct materials to be purchased for the month? A) 40,200 B) 38,280 C) 37,680 D) 38,880 5. Brady Corp. is considering the purchase of a piece of equipment Projected net annual cash flows over the project's life are Year Net Annual Cash Flow of a piece of equipment that costs $20,000. S 3,000 8,000 15,000 9,000 4. The cash payback period is A) 2.31 years. B) 2.40 years. C) 2.29 years. D) 2.60 years. 36. For Franklin, Inc., sales is $1,500,000, fixed espenses are $450,000, and the contribution margin ratio is 36% what are the total variable expenses? A) $540,000 B) $960,000 C) $1,500,000 D) $288,000 37. Mini Inc. is contemplating a capital project costing $47,019. The project will provide annual cost savings of $18,000 for 3 years and have a salvage value of $3,000. The company's required rate of return is 10%. The company uses straight-line depreciation. Present Value PV of an Annuity of L at 10% ofịat10% 909 .909 1.736 Year 826 2.487 751 This project is A) acceptable because it has a zero NPV. B) unacceptable because it earns a rate less than 10%. C) acceptable because it has a positive NPV. D) unacceptable because it has a negative NPV. 38. A company developed the following per-unit standards for its product: 2 pound direct materials at $4 per pound. Last month, 1,500 pounds of direct materials purchased for $5,700. The direct materials price variance for last month was A) $300 unfavorable. B) S150 favorable. C) $5,700 favorable. D) $300 favorable.

Answer 1

24.

	Units		Units
Cost	10000	Per unit	30000	Per unit
1	$ 1,00,000.00	$    10.00	$ 3,00,000.00	$    10.00
2	$    40,000.00	$      4.00	$ 2,40,000.00	$      8.00
3	$    90,000.00	$      9.00	$    90,000.00	$      3.00
4	$    50,000.00	$      5.00	$ 1,50,000.00	$      5.00

Since Per unit cost for 1 and 4 remains same on both quantities, therefore they are variable.
Hence answer is (D) 1 & 4

25. Incremental Revenue = $174 - $135 = $39
Incremental Expenses = $27
Incremental Profit = $12

Since further processing leads to Incremental profit 0f $12, company should process further
Therefore Answer is (D) Process further, company will be better off by $12

26. Since Fixed Costs are allocated to other division, other things remaining same will lead to Decrease in Net income by $620000.

Answer is (B) $620000 decrease

27. Answer is (B) In CVP statement selling expense is generally partly variable and partly fixed expense.