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1. Ans: A
Solution:
Opportunity cost of sales foregone if special project is undertaken
($8.35 240) ..................................................................................
Less: delivery cost ...............................................................................
Relevant cost of 240 kilograms of raw material ..................................
2.
$2,004
71
$1,933
Ans: C
Solution:
Demand for wood carvers:
Labor-hours per unit ..................
Monthly demand in units ...........
Total hours required ...................
Letter Openers
1
800
800
Elvis Statues
6
800
4,800
Candle Holders
2
800
1,600
Letter Openers
$30.00
$20.00
$10.00
1
$10.00
Elvis Statues
$80.00
$40.00
$40.00
6
$6.67
Candle Holders
$42.00
$20.00
$22.00
2
$11.00
Optimal production..........................................
200
800
1,800
1,600
200
1
200
$17,600
2,000
$19,600
3. Ans: C
Solution:
Total rental income = $1,000 + $1,210 + $2,347 + $1,878 + $1,065 = $7,500
U
$1,000
800
V
$1,210
1,300
W
$2,347
2,600
X
$1,878
2,400
160
194
376
300
Y
$1,065
1,300
170
expenses
[(Rental
income in each column
Total rental income of
$7,500) $1,200]*
Apartment
complex
margin
$ 360
$ 104
*expenses rounded to nearest whole dollar
$ 123
($222)
($ 65)
Since complexes X and Y have negative margins, ABD Realty should consider dropping those two
divisions.
4. Ans: A
Solution:
Total needed
(3,000 5) =
F85 ................
15,000
(3,000 5) =
E71 ................
15,000
Inventory
# of units to
purchase on market
Relevant
price
Total cost
15,000
$4.75
$ 71,250
(15,000 13,680)
= 1,320
$4.70
13,680
$3.60
Minimum acceptable price for 3,000 units of QEA ............................
$126,702
6,204
49,248
5.
A
B
C
D
J
2nd
2nd
2nd
2nd
K
3rd
1st
3rd
1st
L
1st
4th
4th
3rd
M
4th
3rd
1st
4th
6. ____________________________________________________________________________
Answer: $17,000
Unit Level = $100,000 / 8,000 * 800 = $10,000
Product Level = 20% * $20,000 = $4,000
Batch Level = $12,000 / 100 * 25 = $3,000
Facility Level = $240,000 / 48,000 * 3,000 = $15,000 should not allocate
$10,000 + 4,000 +3,000 = $17,000
7. The Carolina Furniture Company manufactures kitchen cabinets. The company has always used direct labor cost
to allocate overhead to its two cabinet lines, Heritage and Contemporary. The manufacture of both lines has been
labor intensive. Recently, the company automated production of its Contemporary line of cabinets. It continues to
use labor dollars as the overhead allocation base for both lines. This practice will likely result in which of the
following?
A
B
C
D