Question CPA 04267 Kator Co is a manufacturer of industrial components One of

Question cpa 04267 kator co is a manufacturer of

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Question CPA-04267 Kator Co. is a manufacturer of industrial components. One of their products that is used as a sub-component in auto manufacturing is KB-96. This product has the following financial structure per unit. Selling Price $150 Direct materials $ 20 Direct labor 15 Variable manufacturing overhead 12 Fixed manufacturing overhead 30 Shipping and handling 3 Fixed selling and administrative 10 Total costs $ 90 Kator Co. has received a special, one-time, order for 1,000 KB-96 parts. Assuming Kator has excess capacity, the minimum price that is acceptable for this one-time, special order is in excess of: a. $47 b. $50 c. $60 d. $90 Explanation Choice "b" is correct. $50 (variable cost) is the minimum price that is acceptable for this one-time, special order, assuming excess capacity is available. Variable cost Selling price $150.00 Direct materials $ 20 20 Direct labor 15 15 Variable manufacturing overhead 12 12 Fixed manufacturing overhead 30 Shipping and handling 3 3 Fixed selling and administrative 10 Total costs $ 90 50 Choices "a", "c", and "d" are incorrect, per the above calculation.
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Becker CPA Review Course Registered to: FEI SHAN Distributed by DeVry Educational Products, Inc. Copyright © 2009 DeVry/Becker Educational Development Corp. All rights reserved. Question CPA-04268 Kator Co. has received a special, one-time, order for 1,000 KB-96 parts. Assume that Kator is operating at full capacity, and the next best alternative use of their capacity on existing equipment is LB-64 that would produce a contribution of $10,000. This product has the following financial structure per unit. Selling Price $150 Direct materials $ 20 Direct labor 15 Variable manufacturing overhead 12 Fixed manufacturing overhead 30 Shipping and handling 3 Fixed selling and administrative 10 Total costs $ 90 The minimum price that is acceptable for this one-time, special order is in excess of: a. $57 b. $60 c. $70 d. $87 Explanation Choice "b" is correct. $60 is the minimum price that is acceptable, using the original data, for this one-time, special order. $60 opportunity cost equals variable cost of $50 plus alternative use contribution of $10 ($10,000 profit + 1,000 units). Direct materials 20 Direct labor 15 Variable Mfg OH 12 Variable selling 3 Variable cost 50 Alternative use contribution 10 Opportunity cost 60 Choices "a", "c", and "d" are incorrect, per the above calculation.
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Becker CPA Review Course Registered to: FEI SHAN Distributed by DeVry Educational Products, Inc. Copyright © 2009 DeVry/Becker Educational Development Corp. All rights reserved. Question CPA-04269 In joint-product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold in order to maximize profits? a. Separable costs after the split-off point. b. Joint costs to the split-off point. c. Purchase costs of the materials required for the joint product.
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