bu_247_practice_exam_09-1

bu_247_practice_exam_09-1 -...

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MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.  Pett 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: Direct materials $  22,500  Direct labour 32,500  Variable factory overhead 15,000  Fixed factory overhead     35,000   Total costs $105,000   Of the fixed factory overhead costs, $15,000 is avoidable. 1) 
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Assume  that Pett  can buy  5,000  units of  the part  from  another  producer  for $22  each. The  facilities  currently  used to  make the  part could  be rented  out to  another  manufact urer for  $20,000 a  year. Pett  should 
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1) 
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_______  A) 
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make the part as that would save the company $5,000.  B) 
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buy the part as  that would save $3 per unit.  C) 
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buy the part as  that would save the company $20,000.  D) 
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make the part as that would save $4 per unit.    2) 
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Peters  Company  produces  a product  with the  following  unit cost. Direct  materials 2.75 Direct  labour 1.25 Variable  overhead 4.00 Fixed  overhead 2.50 Unit cost $10.50 Fixed  selling  costs are  $600,000  per year  and  variable  selling  costs are  $1.50 per  unit sold. Productio n capacity  is 500,000  units per  year.  However,  the  company expects to produce only 300,000 units next year.  The product  normally sells for $15 each.  A customer has offered to buy 150,000 units for  $10 each.  The units would be sold in an area outside the market area currently  served. The incremental cost per unit associated with the special order is: 
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2)  ____ ___ 
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$9.50  
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B) 
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$10.00 
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C) 
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$9.25 
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D)  $ 8  
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Costs of  manufact uring two  or more  products  that are  NOT  separately  identifiabl e as  individual  products  until their  split - off  point are  known as 
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3)  ____ ___ 
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separable costs. 
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B)  sun k 
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joint costs.  
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D)  inc rem
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  The Enger  Company is  contemplating  replacing some  old equipment.  The pertinent  information is  as follows: Replacement Old Machine       Machine     Original cost $50,000 $36,000 Useful life in  years 20 8 Current age in  years 12 0 Book value $30,000 - Disposal value  now $  7,500 - Disposal value  in 8 years 0 0 Annual cash  operating costs $14,000 $   7,500
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Which of  the data  provided  in the  table is a  sunk cost? 
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4)  ____ ___  T h e   o r i g i n a l   co st  of  th ol eq ui p m en t.   Th an nu al cash operating costs  of the replacement  equipment. 
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The annual cash  operating costs of the old equipment.  D) 
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The disposal  value of the old equipment.    5) 
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difference  in cost  between 
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bu_247_practice_exam_09-1 -...

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