Final Exam Questionnaire Managerial Accounting and Control 2017-Test.pdf

Final Exam Questionnaire Managerial Accounting and Control 2017-Test.pdf

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Final Exam in Managerial Accounting Name __________________________________________________________ 1. Sunk costs and opportunity costs are inherent in decision making. Required: A. Define the terms "sunk cost" and "opportunity cost." B. How are sunk costs treated when making decisions? C. "Information about sunk costs can be found in the financial statements and accounting records; however, information about opportunity costs is omitted." Do you agree with this statement? Explain. 2. Cornell Corporation manufactures faucets. Several weeks ago, the firm received a special-order inquiry from Yale, Inc. Yale desires to market a faucet similar to Cornell's model no. 55 and has offered to purchase 3,000 units. The following data are available: Cost data for Cornell's model no. 55 faucet: direct materials, $45; direct labor, $30 (2 hours at $15 per hour); and manufacturing overhead, $70 (2 hours at $35 per hour). The normal selling price of model no. 55 is $180; however, Yale has offered Cornell only $115 because of the large quantity it is willing to purchase. Yale requires a design modification that will allow a $4 reduction in direct-material cost. Cornell's production supervisor notes that the company will incur $8,700 in additional set-up costs and will have to purchase a $3,300 special device to manufacture these units. The device will be discarded once the special order is completed. Total manufacturing overhead costs are applied to production at the rate of $35 per labor hour. This figure is based, in part, on budgeted yearly fixed overhead of $624,000 and planned production activity of 24,000 labor hours. Cornell will allocate $5,000 of existing fixed administrative costs to the order as "…part of the cost of doing business." Required:
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