ACC 202 Principles of Management Accounting Fall 2008 Sample Quiz for CH 12 (not graded) 1.

Korn Corporation manufactures five different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is Korn's constrained resource. Korn would make the most profit if it produces the product that:

a. uses the lowest number of stamping machine hours. b. generates the highest contribution margin per unit. c. generates the highest contribution margin ratio. d. generates the highest contribution margin per stamping machine hour. 2. Hoover Inc. has some material that originally cost $74,600. The material has a scrap value of $57,400 as is, but if reworked at a cost of $1,500, it could be sold for $54,400. 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? a. $79,100 b. $21,700 c. $4,500 d. $52,900

3. Rice Corporation currently operates two divisions which had operating results last year as follows:

Since the Troy Division also sustained an operating loss in the prior year, Rice's president is considering the elimination of this division. Troy Division's traceable fixed costs could be avoided if the division were eliminated. The total common corporate costs would be unaffected by the decision. If the Troy Division had been eliminated at the beginning of last year, Rice Corporation's operating income for last year would have been:

a. $15,000 higher b. $30,000 lower c. $45,000 lower d. $60,000 higher

4. Grambling Company produces 1,000 units of a part per year which are used in the assembly of one of its products. The unit cost of producing these parts is:

The part can be purchased from an outside supplier at $20 per unit. If the part is purchased from the outside supplier, two thirds of the total fixed costs incurred in producing the part can be eliminated. The annual increase or decrease on the company's operating incomes as a result of buying the part from the outside supplier would be:

a. $3,000 increase b. $1,000 decrease c. $7,000 increase d. $5,000 decrease 5. Bounty Beet Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $53 to buy from farmers and $18 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $25 or processed further for $18 to make the end product industrial fiber that is sold for $39. The beet juice can be sold as is for $32 or processed further for $28 to make the end product refined sugar that is sold for $79.

How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?

a. $15 b. ($14) c. ($117) d. $1

SOLUTIONS 1. d. 2. c. 3. b. 4. a. 5. d.