GNBExam13 - GNB 11/e Practice Exam Chapter 13 Print these...

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GNB 11/e Practice Exam – Chapter 13 Print these pages. Answer each of the following questions, explaining your answers or showing your work, as appropriate, and then compare your solutions to those provided at the end of the practice exam. 1. A study has been conducted to determine if one of the departments of Eagleton Company should be discontinued. The contribution margin in the department is $150,000 per year. Fixed expenses charged to the department are $130,000 per year. It is estimated that $120,000 of these fixed expenses could be eliminated if the department is discontinued. Part (a) If the department is discontinued, what will be the impact on the company’s overall net operating income? Part (b) Which costs are irrelevant to this decision? 2. Brown Company produces 2,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts is: Variable manufacturing cost $64 Fixed manufacturing cost 36 Unit product cost $100 The part can be purchased from an outside supplier at $80 per unit. If the part is purchased from the outside supplier, two thirds of the fixed manufacturing costs can be eliminated. Part (a) What costs are irrelevant to this decision? Part (b) What would the annual impact on the company’s net operating income be as a result of buying the part from the outside supplier? 3. The following are the Carden Company's unit costs of making and selling an item at a
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volume of 20,000 units per month (which represents the company's capacity): Manufacturing: Direct materials $2.00 Direct labor 4.00 Variable overhead 1.00 Fixed overhead 1.80 Selling and administrative: Variable 3.00 Fixed 1.200 Assume the company has 100 units left over from last year which have small defects and which will have to be sold at a reduced price as scrap. This would have no effect on the company's other sales. The variable selling and administrative costs would have to be
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This note was uploaded on 10/13/2010 for the course ACCT 203 taught by Professor Schorg during the Spring '07 term at Loyola New Orleans.

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GNBExam13 - GNB 11/e Practice Exam Chapter 13 Print these...

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