If Teague wishes to earn $1,250 on the special order, the size of the order would need to be: Selected Answer: 2,250 units.
Answers: 4,500 units. 2,250 units. 1,125 units. 625 units. 300 units. Response Feedback: ($10,000 + $1,250)/($75 - 70) = 2,250 units Question 7 10 out of 10 points A company has the choice of either selling 750 defective units as scrap or rebuilding them. They have already spent $14 per unit making these items. The company could sell the defective units as they are for $8 per unit. Alternatively, it could rebuild them with incremental costs of $3 per unit for materials, $3 per unit for labor, and $1 per unit for overhead, and then sell the rebuilt units for $15.00 each. What should the company do? Selected Answer: It does not matter because both alternatives have the same result. Answers: Sell the units as scrap. Rebuild the units. It does not matter because both alternatives have the same result. Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently. Throw the units away. Response Feedback: Sell as scrap: 750 units x $8 = $6,000 Rework: 750 units x ($15 - $3 - $3 - $1) = $6,000 Question 8 0 out of 10 points A markup percentage equals total costs divided by desired profit.
Selected Answer: Tru e Answers: True Fals e Response Feedback: incorre ct Question 9 10 out of 10 points Teague Plumbing has received a special one-time order for 1,500 toilets (units) at $75 per unit. Teague currently produces and sells 7,500 units at $100 each. This level represents 75% of its capacity. Production costs for these units are $75 per unit, which includes $70 variable cost and $5 fixed cost. To produce the special order, shipping costs of $10,000 will be incurred. Management expects no other changes in costs as a result of the additional production. Should the company accept the special order? Selected Answer: No, because incremental costs exceed incremental revenue. Answers: No, because additional production would exceed capacity. No, because incremental costs exceed incremental revenue. Yes, because incremental revenue exceeds incremental costs. Yes, because incremental costs exceed incremental revenues. No, because the incremental revenue is too low. Response Feedback: Full capacity: 7,500/.75 = 10,000 units Idle capacity: 10,000 units - 7,500 unit = 2,500 units So, idle capacity exists for special order of 1,500 units Special order: ($75 - 70) (1,500) - $10,000 = $(2,500) incremental benefit Question 10 0 out of 10 points Paz Inc. manufactures a product that contains a small motor. The company has always purchased this motor from a supplier for $55 each. Paz recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin
manufacturing the motor instead of buying it. The company prepared the following per unit cost projections of making the motor, assuming that overhead is allocated to the part at the normal predetermined overhead rate of 150% of direct labor cost.
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- Teague, Special Export