1. Green Yard Company, a division of Lawn Supplies, Inc., produces lawn mowers. Green Yard sells lawn mowers to home improvement stores, as well as to Lawn Supplies, Inc. The following information is available for Green Yard's mowers: Fixed cost per unit: $180. Variable cost per unit: $120. Selling price per unit: $450. Lawn Supplies, Inc. can purchase comparable lawn mowers from an outside supplier for $400. In order to ensure a reliable supply, the management of Lawn Supplies, Inc. ordered Green Yard to provide 100,000 lawn mowers per year at a transfer price of $400 per unit. Calculate the minimum transfer price and indicate whether the internal transfer should occur for each of the following: 1. Green Yard is operating at full capacity and would have to give up some current sales to outside buyers if the transfer occurs. 2. Green Yard is not operating at full capacity and could provide the units to Lawn Supplies. MUST SHOW CALCULATIONS
MULTIPLE CHOICE
5. Hermantic Inc. can produce 100 units of a component part with the following costs: | Direct Materials | $45,000 | | Direct Labor | $20,000 | | Variable Overhead | $48,000 | | Fixed Overhead | $33,000 | If Hermantic, Inc. can purchase the components externally for $132,000 and $12,000 of the fixed costs can be avoided, what is the correct "make-or-buy" decision? (Points : 3) | a Make and save $2,000 b Buy and save $2,000 c Make and save $7,000 d Buy and save $20,000 |
| Question 6.6. Seville Company manufactures a product with a unit variable cost of $42 and a unit sales price of $75. Fixed costs were $80,000 when 10,000 units were produced and sold. The company has a one-time opportuity to sell an additional 2,000 units at $55 each in an international market which would not affect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? (Points : 3) | a $84,000 b $40,000 c $26,000 d $10,000 |
| Question 7.7. Which of the following will make the most effective environment for budget acceptance? (Points : 3) | a The budget is prepared by top management. b The budget preparation contains input from all levels of management. c The budget is prepared by department heads. d Acceptance has nothing to do with who prepares budgets. |
| Question 8.8. Which of the following is not a benefit of budgeting? (Points : 3) | a It promotes efficiency. b It deters waste. c It is a basis for performance evaluation. d It assures the company that management will perform at a particular operating level. |
| Question 9.9. Prices are set by the competitive market when (Points : 3) | a the product is specially made for a customer. b there are no other producers capable of manufactauring a similar item. c a company can effectively differentiate its product from others. d a product is not easily distinguished from competing products. |
Question 15.15. Hermantic Inc. can produce 100 units of a component part with the following costs: | Direct Materials | $45,000 | | Direct Labor | $20,000 | | Variable Overhead | $48,000 | | Fixed Overhead | $33,000 | Question 15. If Hermantic, Inc. purchases the components externally for $120,000, by what amount will its total costs change if none of the fixed overhead is avoidable? (Points : 3) |
a An increase of $120,000 b An increase of $26,000 c An increase of $7,000 d A decrease of $33,000
| 18. Waco's Widgets plans to sell 22,000 widgets during May, 19,000 units in June, and 20,000 during July. Waco plans for an ending inventory each month which will be equal to 10% of the next month's sales. How many units should Waco produce during June? (Points : 3) |
a 18,000 b 21,000 c 19,100 d 19,000
