Buy; savings = $25,000Buy; savings = $10,000Make; savings = $20,000Make; savings = $10,000In which situations should opportunity costs be considered?decision making that involves alternative usesforecasting sales
financial accountingbreakeven analysisHarrison Company determines that an opportunity cost of an alternate course of action is relevant to a make or buy decision. Which statement is true of the opportunity cost?should be added to the "Buy" costsshould be subtracted from the "Make" costsshould be added to the "Make" costsshould be ignored if it does not involve a cash outlayWhich one of the following does not affect a make or buy decision?variable manufacturing costsopportunity costincremental revenuedirect labourMeow Cat Toys utilizes Lincoln Fabrics by purchasing the fabric to cover toy mice for its mouse toy division. As it pertains to Lincoln Fabrics, what decision situation does this create?make or buysell or process further
relevant costingbudgetingChapman Company manufactures widgets. Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $60,000 for 100,000 units. Chapman is currently making these components in its own factory. The following costs are associated with this part of theprocess when 100,000 units are produced:Direct material $23,000Direct labour 22,000Manufacturing overhead 30,000Total$75,000The manufacturing overhead consists of $12,000 of costs that will be eliminated if the components are no longer produced by Chapman. From Chapman’s point of view, how much is the incremental cost or savings if the widgets are bought instead of made?$15,000 incremental savings$3,000 incremental cost$3,000 incremental savings$15,000 incremental costCoggin Company gathered the following data about the three products that it produces:Estimated SalesPresent Value beforeAdditionalEstimated SalesProductProcessingProcessing Costsif Processed FurtherA$9,000$6,000$16,000B15,0005,00018,000C11,0008,00016,000Which of the products should be processed further?Product AProduct B
Product CAll three productsWhat role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?It is relevant since it increases the cost of the new equipment.It is not relevant since it reduces the cost of the old equipment.It is not relevant to the decision since it does not impact the cost of the new equipment.It is relevant since it reduces the cost of the new equipment.The most important thing to consider when deciding to replace or keep equipment issalvage value of the current equipment.
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- Winter '09