Professional Documents
Culture Documents
CA CHP 4 MC Questions Share
CA CHP 4 MC Questions Share
CA CHP 4 MC Questions Share
A. $1,080.
B. $1,350.
C. $1,620.
D. $2,700.
2. The Minton Company has gathered the following information for a unit of its most popular
product:
Direct materials $9
Direct labor 3
Cost to manufacture 16
The above cost information is based on 4,900 units. A foreign distributor has offered to buy
1,900 units at a price of $21 per unit. This special order would not disturb regular sales.
Variable shipping and other selling expenses would be an additional $1 per unit for the
special order. If the special order is accepted, Minton's operating profits will increase by:
A. $7,600.
B. $5,700.
C. $9,500.
D. $11,400.
Operating
expenses
375,000 0.75
The cost of goods sold includes $1,500,000 of fixed manufacturing overhead; the operating
expenses include $125,000 of fixed marketing expenses. A special order offering to buy 90,000 units
for $9.50 per unit has been made to Magna. Fortunately, there will be no additional fixed expenses
associated with the order and Magna has sufficient capacity to handle the order. How much will
operating profits be increased if Magna accepts the special order?
Note: Round your answer to the nearest whole dollar.
A. $285,000.
B. $322,500.
C. $360,000.
D. $385,000.
4. Tori Incorporated has some material that originally cost $71,400. The material has a scrap
value of $31,600 'as is', but if reworked at a cost of $2,150, it could be sold for $32,300.
What would be the incremental effect on the company's overall profit of reworking and selling
the material rather than selling it ‘as is’ as scrap? (CMA adapted)
A. $(72,850)
B. $(1,450)
C. $30,150
D. $(41,250)
Material CES4 is in use in many of the company's products and is routinely replenished. Material
XES7 is no longer used by the company in any of its normal products and existing stocks
would not be replenished once they are used up.
What would be the relevant cost of the materials, in total, for purposes of determining a minimum
acceptable price for the order for product Rocket? (CMA adapted)
A. $569,471
B. $564,200
C. $517,270
D. $525,375
6,280 units Rocket × 8 units CES4 = 50,240 units × $3.75 current market $ 188,400
6,280 units Rocket × 6 units XES7 = 37,680 units:
In inventory 31,860 units × $8.75 disposal value 278,775
Purchase 5,820 units × $10.00 current market 58,200
Relevant cost of materials $ 525,375
6. Tara Incorporated is considering using stocks of an old raw material in a special project. The
special project would require all 240 kilograms of the raw material that are in stock and that
originally cost the company $1,680 in total. If the company were to buy new supplies of this
raw material on the open market, it would cost $7.25 per kilogram. However, the company
has no other use for this raw material and would sell it at the discounted price of $6.50 per
kilogram if it were not used in the special project. The sale of the raw material would involve
delivery to the purchaser at a total cost of $95 for all 240 kilograms. What is the relevant cost
of the 240 kilograms of the raw material when deciding whether to proceed with the special
project? (CMA adapted)
A. $1,560
B. $1,465
C. $1,680
D. $1,740
A. $13,500.
B. $19,500.
C. $21,900.
D. $22,260.
8. The operations of Bridgeton Corporation are divided into the Adams Division and the Carter
Division. Projections for the next year are as follows:
Adams Division Carter Division Total
Operating income for Bridgeton Corporation as a whole if the Carter Division were dropped would
be:
A. $192,000.
B. $149,000.
C. $106,000.
D. $70,000.
An outside supplier has offered to sell the component for $17. If Damon purchases the component
from the outside supplier, the manufacturing facilities would be unused and could be rented out for
$10,100. If Damon purchases the component from the supplier instead of manufacturing it, the effect
on operating profits would be a:
A. $80,900 increase.
B. $40,900 decrease.
C. $19,900 decrease.
D. $40,100 increase.
Direct labor 8
Variable
overhead
7
Fixed overhead 9
Unit cost $ 35
Fixed selling costs are $1,040,000 per year. Variable selling costs of $6 per unit sold are added to
cover the transportation costs. Although production capacity is 540,000 units per year, Faulkland
expects to produce only 440,000 units next year. The product normally sells for $40 each. A
customer has offered to buy 64,000 units for $34 each. The customer will pay the transportation
company directly for the transportation charges on the units purchased. If Faulkland accepts the
special order, the effect on operating profits would be a:
A. $64,000 increase.
B. $128,000 increase.
C. $512,000 increase.
D. $384,000 decrease.
$34 − ($11 + $8 + $7) = $8 × 64,000 = $512,000 increase. The selling costs do not need to be
included because the customer will pay those directly to the transportation company.
11. Park Corporation is preparing a bid for a special order that would require 800 liters of
material SUN100. The company already has 620 liters of this raw material in stock that
originally cost $7.00 per liter. Material SUN100 is used in the main product of the company
and is replenished on a regular basis. The resale value of the existing stock of the material is
$6.15 per liter. New stocks of the material can be readily purchased for $7.35 per liter. What
is the relevant cost of the 800 liters of the raw material when deciding how much to bid on
the special order? (CMA adapted)
A. $5,663.
B. $5,880.
C. $5,447.
D. $4,920.
Common fixed expenses have been allocated equally to each of the two divisions. Carter's segment
margin for the West Division is:
A. $150,000.
B. $102,000.
C. $30,000.
D. $110,000.
Variable manufacturing
overhead
103,000
Total $ 899,000
Assume that the fixed manufacturing overhead reflects the cost of Ortega's manufacturing facility.
This facility cannot be used for any other purpose. An outside supplier has offered to sell the
component to Ortega for $34. If Ortega Industries purchases the component from the outside
supplier, the effect on operating profits would be a:
A. $15,700 decrease.
B. $15,700 increase.
C. $47,100 decrease.
D. $47,100 increase.
Variable manufacturing
overhead
102,000
Total $ 876,000
Assume Ortega Industries could avoid $100,000 of fixed manufacturing overhead if it purchases the
component from an outside supplier. An outside supplier has offered to sell the component for $34. If
Ortega purchases the component from the supplier instead of manufacturing it, the effect on income
would be a:
A. $499,200 increase.
B. $83,200 increase.
C. $832,000 decrease.
D. $1,164,800 increase.
The Government Products Division has an opportunity to purchase 14,000 hammers of the same
quality from an outside supplier on a continuing basis. The Hammer Division cannot sell any
additional products to outside customers. Should the Excel Company allow its Government Products
Division to purchase the hammers from the outside supplier at $1.25 per unit?
Cost to buy externally: $1.25 × 14,000 units = $17,500; Cost to make internally: $1.00 × 14,000 units
= $14,000. $17,500 − $14,000 = $3,500. Differential costs increase by $3,500 to purchase, so
continue to make.
16. The Camel Company produces 11,000 units of item Roto 454 annually at a total cost of
$230,000.
Direct materials $ 30,000
Direct labor 65,000
Variable
overhead
55,000
Fixed overhead 80,000
Total $ 230,000
The Yukon Company has offered to supply 11,000 units of Roto 454 per year for $20 per unit. If
Camel accepts the offer, $3 per unit of the fixed overhead would be saved. In addition, some of
Camel's facilities could be rented to a third party for $16,000 per year. What are the relevant costs
for the "make" alternative?
A. $183,000.
B. $204,000.
C. $199,000.
D. $234,000. $30,000 + $65,000 + $55,000 + ($3 × 11,000) + $16,000 = $199,000
17. The Camel Company produces 13,800 units of item Roto 454 annually at a total cost of
$262,200.
The Yukon Company has offered to supply 13,800 units of Roto 454 per year for $18 per
unit. If Camel accepts the offer, $4 per unit of the fixed overhead would be saved. In
addition, some of Camel's facilities could be rented to a third party for $46,920 per year. At
what price would Camel be indifferent to Yukon's offer?
A. $18.90.
B. $19.40.
C. $20.40.
D. $21.40.
18. The Widner Company manufactures two products: Stainless Serving Spoons and Stainless
Serving Forks. The costs and revenues are as follows:
Spoons Forks
$
Sales price $ 88
150
Variable cost per unit 80 42
Total demand for Spoons is 14,000 units and for Forks is 9,000 units. Machine time is a scarce
resource. During the year, 54,000 machine hours are available. Spoons require 5 machine hours per
unit, while Forks require 3 machine hours per unit.
How many units of Spoons and Forks should Widner produce?
Spoons Forks
A. 14,000 0
B. 8,307 4,154
C. 10,800 0
D. 5,400 9,000
A. Option A
B. Option B
C. Option C
D. Option D
Spoons CM/hour: ($150 − 80)/5 = $14; Forks CM/hour: ($88 − $42)/3 = $15.33. Produce Forks first:
9,000 × 3 hours. = 27,000 hours used; 54,000 − 27,000 = 27,000 hours remaining. Spoons: 27,000
hours available/5 = 5,400 units.
19. The following information relates to the Jasmine Company for the upcoming year, based on
436,000 units:
Amount Per Unit
Sales $ 8,720,000 $ 20.00
Cost of goods sold 6,976,000 16.00
Gross margin 1,744,000 4.00
Operating
expenses
654,000 1.50
Operating profits $ 1,090,000 $ 2.50
The cost of goods sold includes $2,223,600 of fixed manufacturing overhead; the operating
expenses include $218,000 of fixed marketing expenses. A special order offering to buy 86,000 units
for $22.20 per unit has been made to Jasmine. Fortunately, there will be no additional fixed costs
associated with the order and Jasmine has sufficient capacity to handle the order. How much will
operating profits increase if Jasmine accepts the special order?
A. $86,000
B. $215,000
C. $885,800
D. $430,000
X Y Z
If Darren has a limit of 30,000 machine hours but no limit on units sold or direct labor hours, then the
ranking of the products from the most profitable to the least profitable use of the constrained
resource is:
rev: 04_14_2023_QC_CS-334850
A. Y, Z, X.
B. X, Y, Z.
C. X, Z, Y.
D. Z, X, Y.
Product
X Y Z
Selling price per unit $ 40 $ 30 $ 35
Variable costs per unit 24 16 20
Contribution margin per
unit
$ 16 $ 14 $ 15