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Multiple Choice

Question 16
Donald Company provided the following information regarding its one and only product-skateboards.

The manufacturing cost per unit, if the contribution approach is used, is:

$13.00

$13.50

$14.75

$15.50

Question 17

Miller Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:

Of the fixed factory overhead costs, $72,000 is avoidable. Assume that Miller Company can buy 5,000 units of the part from another producer for $100.80 each. The current facilities could be used to make 5,000 units of a product that has a contribution margin of $24 per unit. Fixed factory overhead costs to produce this new product would be exactly the same as for the currently produced part. Miller Company should:

continue to make the part and earn an extra $48,000 in profit

buy the part and produce the new product and earn an extra $4.80 per unit contribution to profit

continue to make the part and earn an extra $4.80 per unit contribution to profit

buy the part and produce the new product and earn an extra $24 per unit contribution to profit

Question 18

Hoover Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:

The fixed factory overhead costs are unavoidable. Madison Company has offered to sell 10,000 units of the same part to Hoover Company for $55 a unit. Assuming no other use for the facilities, Hoover Company should:

make the part to save $4 per unit

buy from Madison to save $6 per unit

make the part to save $6 per unit

buy from Madison to save $4 per unit

Question 19

Grape Company produces three products using a joint process which accumulates $25,000 in joint costs. The products, A, B, and C, can be sold at split-off or processed further and then sold. The production level for each product is 10,000 units. The following unit information is also available:

Product C should be processed beyond the split-off point because:

incremental revenues will exceed incremental costs

incremental costs exceed incremental revenue

sales value at completion exceeds sales value at split-off

None of these answers is correct.

Question 20

Lemon Manufacturing Company produces three products using a joint process that accumulates $25,000 in joint costs. The products, A, B, and C, can be sold at split-off or processed further and then sold. The production level for each product is 10,000 units. The following unit information is also available:

Product B:

should be processed further to increase profits by $70,000

should be sold at split-off to maximize profits

should be processed further to increase profits by $3 per unit

can be processed further or sold at split-off; it makes no difference.

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Question 16
Donald Company provided the following information regarding its one and only product-skateboards.

The manufacturing cost per unit, if the contribution approach is used, is:

$13.00

$13.50

$14.75

$15.50

Under contribution approach only the variable manufacturing cost is taken. The variable cost is
Direct material 350,000
Direct labor 170,000
Variable overhead 20,000
Total variable manufacturing cost = 540,000
Cost per unit = 540,000/40,000 = $13.50

Question 17

Miller Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:

Of the fixed factory overhead costs, $72,000 is avoidable. Assume that Miller Company can buy 5,000 units of the part from another producer for ...

Solution Summary

The solution explains some multiple choice questions relating to management accounting

$2.19