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MULTIPLE CHOICE EXAMPLES CHAPTER 11 20. Gill, Inc. is considering using stocks of an old raw material in a special project. The special project would require all 80 kilograms of the raw material that are in stock and that originally cost the company $500 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $7.50 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $5.75 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $30.00 for all 80 kilograms. What is the relevant cost of the 80 kilograms of the raw material when deciding whether to proceed with the special project? A) $430 B) $480 C) $500 D) $460 Ans: A Discounted price of $5.75 per kg x 80kg = $460 $460 - $30 delivery price = $430 Use the following information to answer 2-3 The following are the DShen Company’s unit costs of making and selling an item at a volume of 1,000 units per month (which represents the company’s capacity): Manufacturing: Direct Materials… $1.50 Direct Labor… $1.00 Variable overhead… $1.00 Fixed overhead… $0.80 Selling and Administrative… Variable… $3.00 Fixed… $1.75 Present sales amount to 800 units per month. An order has been received from a customer in a foreign market for 100 units. The order would not affect current sales. Jensen’s total fixed costs,
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This homework help was uploaded on 02/19/2009 for the course AEM 3230 taught by Professor Little,j.e. during the Spring '08 term at Cornell University (Engineering School).

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